Americans for Tax Reform wrote to members of the Florida legislature today, urging them to vote Yes on S 1080 and H 987, common sense proposals that safeguards the state’s revenue base, ensures appropriate transparency over decisions impacting public health, and protects Florida’s businesses and consumers from harmful taxes and unnecessary regulations. 

Tim Andrews, ATR’s Director of Consumer Issues, wrote, “It is the fundamental responsibility of state governments to protect their citizens, even when these threats come from local government officials. Acting without the degree of accountability and scrutiny found at the state level, these officials may impose punitive taxes on the most vulnerable in their communities.” 

Andrews also noted the importance of protecting state revenues, writing, “This is a matter better addressed at the state, not local, level as restricting the use of e-cigarettes and vapor products would lead to further strains on the state budget due to the healthcare costs incurred by people prevented from using them to quit smoking. Further, local tax increases would lead to an increase in smuggling and the sale of illicit products, adversely affecting state tax collections while increasing criminal activity.” 

E-Cigarettes are proven to be 95% less harmful than traditional cigarettes and more than twice as effective at helping smokers quit than other nicotine replacement therapies. Andrews concluded the letter by pointing out to lawmakers the lifesaving impacts that S 1080 and H 987 will have, noting that, “According to Georgetown University Medical Center, e-cigarettes could save over 435,000 lives in the Florida if a majority of smokers made the switch from cigarettes to vaping.” 

The full letter can be read here. ATR also submitted testimony for committee hearings on S 1080 and H 987. That testimony can be accessed here. 

House Democrats led by Energy and Commerce Committee Chairman Frank Pallone (D-NJ), Ways and Means Committee Chairman Richard Neal (D-Mass.), and Education and Labor Committee Chairman Bobby Scott (D-Va.) today reintroduced H.R. 3, the “Lower Drug Costs Now Act.”

This legislation should be rejected by members of Congress. It would impose foreign price controls and a new, 95 percent excise tax on American medicines. This plan will harm patients, manufacturers, and the American healthcare system.

H.R. 3 Adopts Foreign Price Controls from Countries That Have Healthcare Shortages

H.R. 3 arbitrarily sets the prices of medicines based off the prices in six countries - Australia, Canada, the United Kingdom, France, Germany, and Japan.

These countries utilize socialist price controls on their healthcare systems, which in turn reduce access to care. Because there is no way to compete on price, supply is reduced, which ends up harming patients in the form of less access to healthcare.

For instance, Canadian patients wait an average of 19.8 weeks from referral to treatment. By comparison, 77 percent of Americans are treated within four weeks of referral, while just 6 percent wait more than two months.

At any one time, one million Canadians are waiting for treatment according to some estimates.

In the UK, there was a shortage of 10,000 doctors and 43,000 nurses in 2019, with 9 in 10 managers in the National Health Service saying that too few doctors and nurses presented a danger to patients. At any one time, 4.5 million patients were waiting to see a doctor or receive care.

France has been forced to make significant spending cuts to its “free” socialist healthcare system and there have been significant shortages of basic supplies. Australia has also experienced problems with shortages of medicines and healthcare professionals.

H.R. 3 will Lead to Fewer New Cures and Treatments

Adopting foreign price controls will create the same problems that foreign healthcare systems suffer from. It will lead to less medical innovation leading to fewer cures and healthcare shortages for American patients.

The U.S. is currently a world leader when it comes to medical innovation. According to research by the Galen Institute, 290 new medical substances were launched worldwide between 2011 and 2018. The U.S. had access to 90 percent of these cures, a rate far greater than comparable foreign countries. By comparison, the United Kingdom had access to 60 percent of medicines, Japan had 50 percent, and Canada had just 44 percent.

H.R. 3 will directly undermine this medical innovation. In fact, it could lead to 100 fewer lifesaving medicines over the next decade and could reduce life expectancy of the average American by four months, according to a study by the Council of Economic Advisors.

H.R. 3 Imposes a 95 percent, Retroactive Excise Tax on Hundreds of Medicines

H.R. 3 enforces its price controls through a 95 percent, retroactive tax on hundreds of life-saving and life-preserving drugs, including cures for cancer, hepatitis C, epilepsy, and multiple sclerosis. This tax is imposed on the sales of a drug if the manufacturer does not agree to government-imposed prices. The tax starts at a 65 percent rate, increasing by 10 percent every quarter a manufacturer is out of “compliance.”

This tax is concerning for a number of reasons:

• It is imposed at such a high rate that it will result in income taxes above 100 percent of income even if applied to a portion of a business’s sales.  
   
• It is imposed retroactively, rather than prospectively. Taxes are typically imposed prospectively in order to promote consistency, certainty, and fairness. All taxpayers deserve to make decisions based on a reasonable interpretation of the law with the expectation that the future changes to the law will not be applied looking backwards.
   
• It is imposed on sales, not income. Businesses are typically taxed on their income as it allows them to deduct expenses such as wages and other employee benefits, equipment, and machinery. A tax on sales is imposed irrespective of whether a business made any money. 

H.R. 3 Could Cost High-Paying Jobs Across the Country

President Biden has repeatedly promised to create millions of new high paying manufacturing jobs in America. However, H.R. 3 would threaten existing jobs by imposing taxes and price controls on American businesses.

Nationwide, the pharmaceutical industry directly or indirectly accounts for over four million jobs across the U.S and in every state, according to research by TEconomy Partners, LLC. This includes 800,000 direct jobs, 1.4 million indirect jobs, and 1.8 million induced jobs, which include retail and service jobs that are supported by spending from pharmaceutical workers and suppliers.

The average annual wage of a pharmaceutical worker in 2017 was $126,587, which is more than double the average private sector wage of $60,000.

PRO ACT

The PRO Act is a central component of the left's crusade against American workers and small businesses: 

The PRO Act Bans Right to Work Laws Nationwide

• Right to Work laws prohibit employers from forcing their employees to join a union or pay union dues as a condition of employment. Existing Right to Work laws protect 166 million Americans in 27 states, more than half the U.S. population. 
   
• Research shows that Right to Work states experience stronger growth in the number of people employed, growth in manufacturing employment, and growth in the private sector than states run by union bosses. 
   
• According to the National Institute for Labor Relations Research, the percentage growth in the number of people employed between 2007-2017 in Right to Work states was 8.8% and 4.2% in forced-unionism states. Growth in manufacturing employment between 2012-2017 in Right to Work states was 5.5% and 1.7% in forced-unionism states. The percentage growth in the private sector from 2007-2017 in Right to Work states was 13.0% and 10.1% in forced-unionism states.
   

The PRO Act Limits Opportunities To Work With Freelancers and Independent Contractors

• The PRO Act implements California’s disastrous “ABC” test for independent contractors, which forced the mass reclassification of California’s freelancers, causing them to flee the Golden State to chase their dreams and earn a living. The ABC test goes far beyond federal guidance for independent contractors. 
   
• Under the ABC test, businesses must prove that a contractor is doing duties “outside the usual course of work of the hiring entity” and that “the worker customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.” This significantly limits the ability of businesses to retain contractors who may operate within the scope of work sometimes performed by employees in similar circumstances. It’s an unnecessary distinction that prohibits most businesses from working with independent contractors.
   
• The ABC was widely unpopular among California’s independent contractors, over 90 percent of whom opposed Assembly Bill 5 before Governor Gavin Newsome signed it into law. ATR has compiled 655 personal testimonials from independent contractors who details the ways that AB5 has hurt them, which you can view here. 
   
• If the PRO Act is passed into law, the livelihoods of more than 59 million independent contractors across the country will be at risk.
   

PRO Act Forces Employers to Hand Over Sensitive Employee Contact Information to Union Organizers

• The PRO Act forces employers to turn over private employee contact information - such as home addresses, email addresses, and personal phone numbers - to union bosses during organization drives. This would open workers to union intimidation and harassment. 

ELIMINATION OF STEPPED UP BASIS: A SECOND DEATH TAX

President Biden and the Democrats vow to target small businesses and individuals with a new Death Tax: They will eliminate step-up in basis. This will impose a steep tax increase and paperwork nightmare for small businesses, farms, and families. It will also violate his own pledge against raising any tax on any American making less than $400,000. In this video, you can see a sample of the many times Biden has threatened to eliminate step-up in basis.

Elimination of stepped up basis would impose an automatic capital gains tax at death -- separate from, and in addition to -- the Death Tax.

In a Forbes piece titled "This Biden Tax Hike Hike Will Hit Mom & Pop Hard" tax lawyer Robert W. Wood writes:

Under current tax law, assets that pass directly to your heirs get a step-up in basis for income tax purposes. It doesn’t matter if you pay estate tax when you die or not. For generations, assets held at death get a stepped-up basis—to market value—when you die. Small businesses count on this.

Wood notes:

Biden's proposal would tax an asset's unrealized appreciation at transfer. You mean Junior gets taxed whether or not he sells the business? Essentially, yes. The idea that you could build up your small business and escape death tax and income tax to pass it to your kids is on the chopping block. Biden would levy a tax on unrealized appreciation of assets passed on at death. By taxing the unrealized gain at death, heirs would get hit at the transfer, regardless of whether they sell the asset.

As reported previously by CNBC:

“When someone dies and the asset transfers to an heir, that transfer itself will be a taxable event, and the estate is required to pay taxes on the gains as if they sold the asset,” said Howard Gleckman, senior fellow in the Urban-Brookings Tax Policy Center. 

In its analysis of Biden's tax plan, Tax Policy Center says the step-up in basis proposal mirrors a proposal described in an Obama-Biden 2016 Treasury Department document. This document confirms that Biden will force a capital gains tax payment immediately upon transfer of an asset after death of a loved one:

Under the proposal, transfers of appreciated property generally would be treated as a sale of the property. The donor or deceased owner of an appreciated asset would realize a capital gain at the time the asset is given or bequeathed to another.

The amount of the gain realized would be the excess of the asset's fair market value on the date of the transfer over the donor's basis in that asset. That gain would be taxable income to the donor in the year the transfer was made, and to the decedent either on the final individual return or on a separate capital gains return.

CONGRESS ELIMINATED STEPPED UP BASIS IN 1976 BUT IT WAS SUCH A DISASTER IT WAS REPEALED

In 1976 congress eliminated stepped-up basis but it was so complicated and unworkable it was repealed before it took effect because it was an impossible-to-overcome compliance burden.

As noted in a July 3, 1979 New York Times article, it was "impossibly unworkable":

Almost immediately, however, the new law touched off a flood of complaints as unfair and impossibly unworkable. So many, in fact, that last year Congress retroactively delayed the law's effective date until 1980 while it struggled again with the issue.

As noted by the NYT, intense voter blowback ensued:

Not only were there protests from people who expected the tax to fall on them -- family businesses and farms, in particular -- bankers and estate lawyers also complained that the rule was a nightmare of paperwork.

A DOUBLED CAPITAL GAINS TAX, HIGHEST SINCE JIMMY CARTER IN 1977

Biden vows to impose capital gains tax increases just as America digs out from the pandemic. He said "every single solitary person" will pay capital gains taxes at ordinary income tax rates. Biden wants to take the current capital gains tax rate of 20 percent and double it to 39.6 percent, highest since Jimmy Carter in 1977 when the highest possible capital gains rate was 39.875 percent.

Here is the documentation of Biden's threatened capital gains tax hike:

On Oct. 23, 2019 Biden said: “So every single solitary person, their capital gains are going to be treated like real income and they are going to pay 40 percent on their capital gains tax."

On Sept. 27, 2019 Biden said: “I’m gonna double the capital gains rate to 40 percent."

On Aug. 21, 2019 Biden said: “The capital gains tax should be at what the highest minimum tax should be, we should raise the tax back to 39.6 percent instead of 20 percent."

Video documentation of the above statements can be found here: How High Will Biden Raise Your Capital Gains Taxes?

In 2012, Vice President Biden and President Obama succeeded in their push to let the capital gains tax rate rise to 20 percent (from the Bush-era rate of 15 percent.)

Biden and Obama then piled on another 3.8 percent capital gains tax hike -- the Net Investment Income Tax -- one of the many tax increases in Obamacare. The 3.8 percent tax hike took effect Jan. 1, 2013, purposefully timed to kick in *after* the 2012 election.

Some taxpayers under Biden will face a capital gains tax rate over 50 percent, when combined with state capital gains taxes. California's 13.3 percent state capital gains rate means Golden State taxpayers will face a rate of 56.7 percent (39.6 + 3.8 + 13.3 = 56.7%).

So what ever happened to the high capital gains rate under President Carter? In 1978 he wanted to raise the rate even higher. But there was a backlash from middle class households around the country, from Democrats and Republicans alike. It was so fierce, Carter was forced to relent and ended up signing a capital gains tax cut.

As recounted by Mark Bloomfield in the Wall Street Journal:

But the year was 1978, the push for a tax hike came from President Jimmy Carter, and the tax in question was on capital gains. Mr. Carter wanted to tax capital gains at the same rate as ordinary income -- effectively doubling the rate for many taxpayers.

He didn't get his tax hike, but he did spark a pro-growth insurgency that reframed the tax debate.

DEMOCRATS IMPOSED NEW 1099 PAPERWORK REQUIREMENTS

Democrats snuck through new reporting requirements that will increase tax complexity for independent contractors, small businesses, and freelancers. This was part of the recently-enacted "stimulus" bill as another attempt by the Left to exploit the pandemic by passing unrelated policy measures long desired by progressives.

The provision lowered the reporting threshold to $600 or more for 1099-K reporting and eliminated the transactions threshold. Previously, Americans were only required to report when there were more than $20,000 in sales and more than 200 transactions in a year. The provision also extends the 1099-K reporting to "specified electronic payment processors."

This will burden low- and middle-income contractors, small businesses, and freelancers, many of which have been devastated by the coronavirus pandemic. Implementing new, burdensome reporting rules will only do more damage.

Democrats last enacted burdensome new 1099 reporting requirements in Obamacare, when they required businesses to send 1099 forms for all purchases of goods and services over $600 annually.

Soon after this provision was signed into law, the National Taxpayer Advocate raised concerns that these reporting requirements would cause “disproportionate” harm to small businesses and do little to improve tax compliance.

This provision was so unpopular that it was quickly repealed in 2011 with a bipartisan vote of 87 to 12 in the Senate and 314 to 112 in the House. The Obama administration even hailed repeal of the provision a “big win” for small businesses in a press release:  

“Today, President Obama signed a law that removes the expanded ‘1099’ reporting requirement from the Affordable Care Act. This is a big win for small businesses.

The SBA and President Obama supported repealing this provision, which would have required businesses to send 1099 forms for all purchases of goods and services over $600 annually. With this bipartisan effort, we have removed a requirement that would have been an undue barrier to small business growth.”

Increasing compliance costs and the regulatory burden on already-struggling workers and small business owners is especially alarming given they have been disproportionately harmed by the pandemic.

CORPORATE TAX RATE HIKE WILL DIRECTLY RAISE UTILITY BILLS FOR SMALL BUSINESSES -- ELECTRIC, GAS, WATER BILLS

If Democrats increase the corporate income tax rate, they will have to explain why they just increased the utility bills of households and small businesses which typically operate on tight margins, with considerable heating, cooling, gas, and refrigeration costs.

Customers bear the cost of corporate income taxes imposed on utility companies. Corporate income tax cuts drive utility rates down, corporate income tax hikes drive utility rates up.

Electric, gas, and water companies must get their billing rates approved by the respective state utility commissions. When the 2017 Tax Cuts and Jobs Act cut the corporate income tax rate from 35% to 21%, utility companies worked with officials to pass along the tax savings to customers

Many Americans benefited from lower electric bills, lower gas bills, and lower water bills. ATR collected over 140 examples nationwide here and you may view a compilation of local television reports here.

It disproportionately impacts family-owned businesses like farmers and ranchers especially that tend to be asset rich but cash poor. On the other hand, the wealthy often evade the tax through loopholes and armies of lawyers and accountants. 

The Tax Cuts and Jobs Act of 2017 made key progress toward repealing the Death Tax by doubling exemption from $5.5 million to $11 million. Unfortunately, because of arcane senate rules, this tax cut expires in 2025.

Moving forward, the Death Tax should be permanently repealed. While conservatives in Congress support repeal of the Death Tax, Democrats want to dramatically increase the size and scope of the Death Tax.

For instance, Senator Bernie Sanders (I-Vt.) has proposed nearly doubling the death tax to 77 percent in his new Estate Tax Plan, returning the death tax to levels unseen since the 1970s. President Joe Biden has expressed interest in reducing the current exemption for individual’s eligibility of transfer from $11.7 million to $3.5 million for estates.

Repealing the death tax would stimulate job creation and grow the economy. Numerous studies have found that repealing the death tax would grow the economy. For instance, a 2017 study by the Tax Foundation found that the US could create over 150,000 jobs by rolling back the estate tax.

Similarly, a 2012 study by the Joint Economic Committee found that the death tax has destroyed over $1.1 trillion of capital in the US economy, which results in fewer jobs and lower wages. Much of this economic damage hits small businesses, which are the core of America’s economy and have been disproportionately harmed by the Coronavirus pandemic. The economic growth created by repealing the Death Tax would produce $221 billion in federal revenue because of increased wages and more jobs.

The Death Tax is extremely unpopular. Numerous studies have found that majority of Americans oppose the Death Tax and support its repeal. For instance, a recent report by NPR found that 76 percent of Americans support full, permanent repeal of the Death Tax.  

Repeal of the Death Tax would spur economic growth, create jobs, and increase wages. It would end double taxation and help family-owned businesses across the country.

Today, Sen. Bernie Sanders (I-Vt.) and Rep. Pramila Jayapal (D-Wash.) introduced a bill which would impose a $2.4 trillion financial transaction tax (FTT), harming retirees and savers and restricting economic growth. This is just one of many taxes progressives have proposed. 

This tax would be used to fund tuition-free community college and tuition-free, debt-free public college for families earning under $125,000 a year. The FTT would impose a 0.5% tax on all stock trades, a 0.1% fee on bonds, and a 0.005% fee on derivatives. According to Sanders' press release, the tax would raise up to $2.4 trillion over the next decade.

Most FTT proposals prior to this would have imposed a 0.1% tax on all stock trades, making this a particularly radical proposition. 

An FTT will harm American retirees and savers including those that have their investments in 401(k)s, pensions, and index funds. While the Left claims this tax will make wealthy hedge funds pay “their fair share,” the FTT is really a tax on American savers and investors, including the 53 percent of American households that own stock and the 80 to 100 million Americans that have a 401(k). 

This tax will fall especially hard on public sector pensions including those used by teachers, firefighters, and police officers rely that rely on hedge funds for retirement security. In fact, an FTT would cost pension funds billions of dollars every year, leading to fewer savings, less retirement income for retirees, and underfunded pensions. 

Further, a study by BlackRock found that a financial transaction tax of 0.1 percent would result in an investor losing $2,300 in returns on a $10,000 investment in a global equity fund over ten years. Keep in mind, Sanders’ proposed FTT would cause even more harm, as his proposed rate is 0.5 percent. 

It would also cut deeply into retirement accounts. A 2021 study conducted by the Modern Markets Initiative found a financial transaction tax from 0.02 to 0.5 percent would cost $45,000 to $65,000 over the lifetime of a 401(k) account. 

FTTs have a history of failure. In 1984, Sweden imposed a financial transaction tax, a proposal that lasted just six years. Even though investors were restricted in moving capital to foreign markets, most trading migrated to London to avoid the tax. Not only did this mean the FTT raised little revenue, but capital gains tax revenue dropped because of a reduction in sales. When it was abolished in 1990, investment began to return to Sweden.  

In fact, several countries have experienced the same FTT process: an FTT is made law, the tax is reduced, the tax is finally eliminated. According to the Center for Capital Markets, this has happened in Spain (1988), Netherlands (1990), Germany (1991), Norway (1993), Portugal (1996), Italy (1998), Denmark (1999), Japan (1999), Austria (2000), and France (2008). It was even repealed here in the United States in 1965 through a bipartisan vote, due to its failure. In the years following the repeal, trading volume in the United States increased substantially.   

An FTT does not raise the revenue supporters claim it does. The Congressional Budget Office found that imposing a FTT in the U.S. would “decrease the volume of transactions” and “probably reduce output and employment.” Some have predicted that a financial transactions tax would raise little, if any, net revenue because of these negative impacts.   

FTTs also cause capital to flee to jurisdictions that do not tax transactions, further reducing revenues. When Italy and France imposed FTTs in 2012, both countries raised less than a quarter of expected revenues.    

As reported in Politico, Congressman Gregory Meeks (D-NY) recently argued that an FTT “hurts New Yoek in a big way” because it would cause trading to leave the State.

Similarly, Rep. Bill Foster (D-Ill.) argued that an FTT would reduce trading volumes and fail to raise revenue. He said:  

“My suspicion is that when you would actually score something like that, you'd look at the drop in trading volume that would happen and you'd find that the revenue raised would be small.” 

His suspicion is correct. The tax simply would not raise the revenue supporters claim it would. This is because it would reduce the volume of transactions, output, and employment.

Voters opposes a financial transaction tax by a margin of three-to-one. The U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness conducted a national poll of 2,000 likely voters. According to this data, 63 percent of voters opposed an FTT including 49 percent of voters that were “strongly opposed.” Just 23 percent of voters supported an FTT.

Americans for Tax Reform, along with a coalition of 30 conservative and free market organizations, released a letter opposed to an FTT, urging all members of Congress to reject any proposal to implement this tax. As the signatories note, the FTT is the latest attempt by the Left to take advantage of a “crisis” to implement a massive new tax on the American people. Contrary to their rhetoric, this tax would be borne by the American people, not Wall Street. 

Additionally, Republicans on the House Financial Services Committee, led by Ranking Member Patrick McHenry (R-NC), released a resolution condemning attempts to impose this new tax. As Rep. McHenry noted, this tax would harm Americans saving for retirement, cost jobs, and reduce access to new capital.  

A $2.4 trillion financial transactions tax would punish investment, leading to market volatility and a reduction in output and employment. This proposal would certainly hurt our recovery coming out of the pandemic.