Obamacare: Taxpayers Must Report Personal Health ID Info to IRS
The new form will require disclosure of a taxpayer’s personal identifying health information in order to determine compliance with the Affordable Care Act’s individual mandate.
As confirmed by IRS testimony to the tax-writing House Committee on Ways and Means, “taxpayers will file their tax returns reporting their health insurance coverage, and/or making a payment”.
So why will the Obama IRS require your personal identifying health information?
Simply put, there is no way for the IRS to enforce Obamacare’s individual mandate without such an invasive reporting scheme. Every January, health insurance companies across America will send out tax documents to each insured individual. This tax document—a copy of which will be furnished to the IRS—must contain sufficient information for taxpayers to prove that they purchased qualifying health insurance under Obamacare.
This new tax information document must, at a minimum, contain: the name and health insurance identification number of the taxpayer; the name and tax identification number of the health insurance company; the number of months the taxpayer was covered by this insurance plan; and whether or not the plan was purchased in one of Obamacare’s “exchanges.”
This will involve millions of new tax documents landing in mailboxes across America every January, along with the usual raft of W-2s, 1099s, and 1098s. At tax time, the 140 million families who file a tax return will have to get acquainted with a brand new tax filing form. Six million of these families will end up paying Obamacare’s individual mandate non-compliance tax penalty.
As a service to the public, Americans for Tax Reform has released a projected version of this tax form to help families and tax specialists prepare for this additional filing requirement. Taxpayers may view the projected IRS form at www.ObamacareTaxForm.com. On the form, lines 3-4 show where taxpayers will disclose their personal health ID information.
View PDF here.
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AZ Republicans Want to Return Surplus Revenue to Taxpayers In the Form of Pro-Growth Income Tax Relief
Arizona Republicans are working on a tax plan that would reduce and maybe even phase out the state income tax. This would be a huge win for all Arizonans.
Arizona is experiencing a $3.9 billion surplus for FY 2022, $1.2 billion of which is projected to be ongoing. Rather than using that money to grow government, Gov. Doug Ducey, Sen. J.D. Mesnard, President Pro Tem. Vince Leach, Majority Leader Ben Toma, and many others want to give it back to taxpayers in the form of pro-growth income tax relief.
“Arizona’s leaders understand that surplus revenue belongs to Arizona taxpayers. It is not a slush fund for politicians,” explained Grover Norquist, president of Americans for Tax Reform. “Surplus dollars belong to the hardworking taxpayers. Gov. Ducey, Sen. Mesnard, Sen. Leach, Rep. Toma, and many others are doing the smartest thing that can be done in this situation – returning the money back to Arizonans in a manner that also makes the state tax climate more competitive and conducive to growth. Letting taxpayers keep more of their own money and setting up the state for economic success is a huge victory for everyone.”
Arizona’s current income tax is not competitive. Its top rate of 8% is one of the highest in its region and the entire country. Making matters worse for Arizona, as people and jobs continue to move out of high tax states and into states that do not impose income taxes, more and more states are looking to put their income taxes on the path to zero. This growing movement will make Arizona even less competitive in the coming years.
Fortunately, the Republican tax plan – particularly if it includes a full phase out of the income tax – would turn things around for Arizona, making it a national model for other states to copy. As currently written, the plan would:
· Streamline Arizona’s current 4-bracket income tax (5 brackets when considering the Prop 208 “surcharge” of 3.5% that will be imposed on certain income, giving Arizona a top rate of 8%) into a flat tax of 2.5%, lower than Arizona’s current bottom rate of 2.59% (technically it would have 2 brackets with the Prop 208 “surcharge,” but the plan includes an aggregate cap to ensure the top rate is not higher than 4.5%).
· Couple the standard deduction to inflation.
· Quadruple the child tax credit.
*There is also a serious effort to include a full phase out of the income tax. This would be accomplished through the use of revenue triggers, a responsible way for states to provide tax relief without the need to cut spending or raise other taxes, and without the risk getting ahead of their ski tips. The rate would only be reduced when excess revenue is available to “pay for” it.
The Republican tax plan would be a huge win for all Arizonans. Reducing and eliminating the income tax would attract businesses and investment to the state, bringing new jobs and opportunities for current Arizona residents. It would allow small businesses, which overwhelming pay income taxes on the personal side of the code, to invest more in higher wages. And it would allow individual taxpayers and families to keep more of their hard-earned money.
Stay tuned for more details.
Photo Credit: Madden
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Ohioans Will Get Stuck with Higher Utility Bills Due to Biden Corporate Tax Rate Hike
If Brown votes for Biden's corporate income tax rate increase, he will have to explain why he just increased your utility bills
If President Biden and Sen. Sherrod Brown raise the corporate tax rate, Ohio households and businesses will get stuck with higher utility bills. Democrats plan to impose a corporate income tax rate increase to 28%, even higher than communist China's 25%.
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, including at least 10 Ohio utilities.
As noted in a July 2019 First Energy Corp. Press Release:
“Ohio Edison, Cleveland Electric Illuminating Company and Toledo Edison – announced today that the Public Utilities Commission of Ohio (PUCO) approved a comprehensive settlement agreement that will return additional savings to customers related to federal income tax law changes and includes investments to modernize the electric distribution system with advanced automation equipment, real-time voltage controls and smart meters.
“FirstEnergy's Ohio customers will receive 100 percent of the tax savings created by the federal Tax Cut and Jobs Act, which includes tax savings already credited to customers since last year. As a result of the additional tax savings, a typical residential customer using 1,000 kilowatt hours of electricity could expect to see a reduction of over $4 in monthly bills.”
"We are pleased to resolve the tax reform issues and will pass along the tax savings to customers," said Samuel L. Belcher, senior vice president and president of FirstEnergy Utilities. "We look forward to modernizing our electric system with advanced equipment that will help reduce the number and duration of power outages. Smart meters also will allow our customers to make more informed decisions about their energy usage.” – July 17, 2019 First Energy Corp. press release
Dominion Energy Ohio passed along their savings to customers as well:
The Public Utilities Commission of Ohio (PUCO) today adopted an agreement that authorized Dominion Energy Ohio (Dominion) to establish a credit on gas customer bills to reflect the impact of the Tax Cuts and Jobs Act (TCJA) of 2017 on its rates.
Dominion will credit residential customers the amount it has over collected, plus interest, since Jan. 1, 2018 under the previous corporate tax rate. The $50.9 million credit will be passed back to all customers over a 12 month period.
Dominion will return to customers annually approximately $18.9 million, which reflects the remaining tax savings not currently accounted for in rates, on a going-forward basis, until the Commission approves updated rates through a distribution rate case. Dominion is expected to file an application with the PUCO for its next distribution rate case in 2024.
Dominion will return to customers normalized excess deferred income tax (EDIT), estimated by the utility to be approximately $416 million, over a federally prescribed time period of approximately 38 years.
Dominion will credit customers non-normalized EDIT, estimated by the utility to be approximately $181 million, over approximately a six-year period.
A residential customer will see a bill reduction of approximately $5.80 per month for the first year, a $3.15 reduction in years two through six and a $1.55 reduction in year seven and beyond. – Dec. 5, 2019 WKTN article.
Duke Energy Ohio, Inc passed along their savings to customers as well:
Duke Energy Ohio customers will receive approximately $20 million in annual tax savings on their electric bills beginning this month. The bill reduction is a result of the recent Tax Cuts and Jobs Act, which federal lawmakers passed in late 2017.
"The tax act provides a unique opportunity for us to reduce customers' bills by millions of dollars," said Jim Henning, president of Duke Energy Ohio and Kentucky. "And that's exactly what we're doing here – delivering real savings to our customers."
Duke Energy Ohio also plans to lower its customers' natural gas bills by about $3 million beginning in May – subject to the approval of proposals filed with state regulators.
"The tax act reduced our corporate tax rate – and that's a benefit we are pleased to pass along to our customers," said Henning. "However, the impacts on our business and customers go far beyond the reduction in the corporate tax rate. While some of the changes reduce our federal tax liabilities over time, others could actually increase our tax obligations.
"We considered all of these scenarios as we determined the best ways to pass along the benefits of the tax act to our customers. And we continue to work through various regulatory proceedings in our efforts to ensure that our customers receive the benefits of this new law." – April 13, 2018, Duke Energy Press Release
Ohio Edison passed along their savings to customers as well:
“Ohio Edison, Cleveland Electric Illuminating Company and Toledo Edison – announced today that the Public Utilities Commission of Ohio (PUCO) approved a comprehensive settlement agreement that will return additional savings to customers related to federal income tax law changes and includes investments to modernize the electric distribution system with advanced automation equipment, real-time voltage controls and smart meters.
“FirstEnergy's Ohio customers will receive 100 percent of the tax savings created by the federal Tax Cut and Jobs Act, which includes tax savings already credited to customers since last year. As a result of the additional tax savings, a typical residential customer using 1,000 kilowatt hours of electricity could expect to see a reduction of over $4 in monthly bills.”
"We are pleased to resolve the tax reform issues and will pass along the tax savings to customers," said Samuel L. Belcher, senior vice president and president of FirstEnergy Utilities. "We look forward to modernizing our electric system with advanced equipment that will help reduce the number and duration of power outages. Smart meters also will allow our customers to make more informed decisions about their energy usage.” – July 17, 2019 First Energy Corp. press release
Toledo Edison passed along their savings to customers as well:
“Ohio Edison, Cleveland Electric Illuminating Company and Toledo Edison – announced today that the Public Utilities Commission of Ohio (PUCO) approved a comprehensive settlement agreement that will return additional savings to customers related to federal income tax law changes and includes investments to modernize the electric distribution system with advanced automation equipment, real-time voltage controls and smart meters.
“FirstEnergy's Ohio customers will receive 100 percent of the tax savings created by the federal Tax Cut and Jobs Act, which includes tax savings already credited to customers since last year. As a result of the additional tax savings, a typical residential customer using 1,000 kilowatt hours of electricity could expect to see a reduction of over $4 in monthly bills.”
"We are pleased to resolve the tax reform issues and will pass along the tax savings to customers," said Samuel L. Belcher, senior vice president and president of FirstEnergy Utilities. "We look forward to modernizing our electric system with advanced equipment that will help reduce the number and duration of power outages. Smart meters also will allow our customers to make more informed decisions about their energy usage.” – July 17, 2019 First Energy Corp. press release
Vectren passed along their savings to customers as well:
The Public Utilities Commission of Ohio (PUCO) today adopted an unopposed agreement authorizing Vectren Energy Delivery of Ohio (Vectren) to establish a credit on natural gas customer bills to reflect the impact of the Tax Cuts and Jobs Act (TCJA) of 2017 on its rates.
Vectren will credit residential customers the amount it has over collected, plus interest, since Jan. 1, 2018 under the previous corporate tax rates. The $6 million credit, including interest, will be passed back to customers through the end of 2021.
Vectren will return to customers normalized excess accumulated deferred income tax (EDIT), estimated by the utility to be $74.6 million, over an approximately 25-year period.
Vectren will credit customers non-normalized EDIT of $25.9 million over a six-year period.
Each Vectren residential customer is estimated to receive approximately $270 in total credit over the duration of the refunds. – July 1, 2020 Ohio Public Utility Commission Statement
Suburban Natural Gas Company passed their savings along to customers as well:
The Public Utilities Commission of Ohio (PUCO) today authorized Suburban Natural Gas Company to establish a credit on natural gas customer bills to reflect the impact of the Tax Cuts and Jobs Act (TCJA) of 2017 on its rates.
Suburban will credit residential customers the amount it has over collected, plus interest, since Jan. 1, 2018 under the previous corporate tax rates. The $454,785 credit, which includes interest, will be passed back to customers over a 24-month period.
Suburban will return to customers normalized excess accumulated deferred income tax (EDIT), estimated by the utility to be approximately $1.6 million.
Suburban will credit customers non-normalized EDIT of $233,650 over a 10-year period. – September 9, 2020 Ohio Public Utility Commission Statement
Northeast Ohio Natural Gas Corp. passed their savings along to customers as well:
The Public Utilities Commission of Ohio (PUCO) today authorized Northeast Ohio Natural Gas Corp. (NEO) to establish a credit on natural gas customer bills to reflect the impact of the Tax Cuts and Jobs Act (TCJA) of 2017 on its rates.
NEO will credit residential customers the amount it has over collected, plus interest, since Jan. 1, 2018 under the previous corporate tax rates. The $500,423 credit, including interest, will be passed back to customers over a 12-month period.
NEO will return to customers normalized excess accumulated deferred income tax (EDIT), estimated by the utility to be approximately $2.3 million, over a federally prescribed time period.
NEO will credit customers non-normalized EDIT of $50,867 over a 72-month period.
A residential customer, using approximately 10 Mcf per month, will see a bill reduction of approximately $1.37 per month for the first year. – May 20, 2020 Ohio Public Utility Commission Statement
South Central Power Co. passed their savings along to customers as well:
As some of the year’s highest electric bills are hitting consumers’ mailboxes thanks to near-record heat this summer, South Central Power members are getting a one-time break on transmission charges that could decrease the average member’s July bill by around $10.
The bill reduction is a result of the recent Tax Cuts and Jobs Act, which federal lawmakers passed in late 2017. “Thanks to tax savings realized by our transmission provider, we received a credit of roughly $1.7 million toward our transmission costs,” said Allison Saffle, VP of member service for South Central Power. “We’ve passed those savings directly on to consumers, who will see them reflected in lower transmission charges on this month’s bills. Going forward, the impact of the lower tax rates will be passed directly on to consumers, who will see transmission costs lowered by roughly $1 per month.” – July 24, 2018 South Central Power Co. Statement
Conversely, a vote for a corporate income tax rate hike is a vote for higher utility bills right as the USA is trying to recover from the pandemic.
Sen. Brown would be wise to stay away from tax increases.
Lawmakers Should Support Sen. Toomey, Rep. Arrington Full Expensing Bill
Senator Pat Toomey (R-Pa.) and Rep. Jodey Arrington (R-Texas) are reintroducing the Accelerate Long-Term Investment Growth Now (ALIGN) Act. This bill would make full business expensing permanent, which will ensure businesses can continue investing in the economy and creating jobs so that America can move past the Coronavirus pandemic.
The Tax Cuts and Jobs Act moved in the right direction on expensing by allowing most assets (those with 20 years or less of depreciable life) to be expensed in the year they are purchased. However, this provision begins sunsetting at the end of 2022 and fully expires at the end of 2026.
Moving forward, Congress should make expensing permanent and expand it, as proposed by ALIGN Act.
What is Expensing?
Full business expensing reduces taxes for businesses by allowing them to deduct the cost of new investments (machinery, equipment etc.) in the year they are made.
There are several benefits to this policy. First, it incentivizes new investment, leading to greater economic productivity, job growth and higher wages. Second, it simplifies the tax code by equalizing the tax treatment of new investments with other business expenses such as wages, rent, and healthcare costs.
As the economy starts to open back up and Americans are being vaccinated, expensing will help businesses make vital investments as they continue to bring workers back, onshore manufacturing capabilities, and ramp up production.
Full Business Expensing Creates Jobs and Grows the Economy
Allowing immediate expensing gives businesses the equivalent of a zero percent rate on new investments. This has two benefits – it means more money for businesses to create jobs and increase pay, and it creates an incentive to increase capital investment, which leads to stronger economic growth, more jobs, higher productivity, and higher wages.
A Tax Foundation study estimates that making full business expensing permanent will increase GDP by 0.9 percent, creating over 172,000 jobs over the next decade. It is also important to note that this estimate accounts for only a fraction of the full benefits of expensing, because expensing is already law for much of the 10-year budget baseline.
Previous research by the Tax Foundation has estimated that over a decade, expensing can increase GDP by five percent and increases wages by 4 percent, creating more than one million jobs.
Expensing Makes the Tax Code Fairer and Simpler
By allowing businesses to write off the cost of new investments immediately, full business expensing removes a bias in the tax code. Prior to the enactment of expensing, businesses were forced deduct, or “depreciate” the cost of new investments over multiple years depending on the asset they purchase, as dictated by complex and arbitrary IRS rules.
These rules create needless complexity and increase compliance costs. A business could write off a box of paper clips immediately but had to wait five years to recover the full cost of purchasing a computer, or seven years to recover the full cost of purchasing a desk.
This forced business owners to make decisions based on tax reasons, while full business expensing treats all assets and business expenses equally.
There is Strong Support for Full Business Expensing
Expensing has the support of conservative groups, economists, and key House Republicans such as Ways and Means Ranking Republican Kevin Brady (R-Texas).
While many on the left equate full business expensing as a “loophole,” this was not always the case. Former Obama Economic Adviser Jason Furman has long supported full business expensing, and the policy was included in several Obama budgets (albeit as part of a net tax increase).
The Obama White House correctly noted that the provision would help businesses and workers in press releases and fact sheets:
“If a business bought an additional $1 million worth of equipment next year, they would be able to deduct the full $1 million up front, potentially accelerating hundreds of thousands of dollars in tax cuts. That’s real money that businesses… could use to expand or hire new workers right now, and provides a strong incentive to increase investment now, creating even more jobs.”
President Obama is right. Full expensing helps workers, businesses, and the economy. As lawmakers look to turn the economy around, they must preserve and enhance expensing.
Photo Credit: Gage Skidmore
Texas Considers Tax Hike on a Tourism Industry Trounced by Pandemic
For years, the Lone Star state has been a shining light for other states, showing that low taxes mean big growth.
One of nine states with no income tax, Texas has led the nation in population growth over the past decade, and become the world’s ninth-largest economy.
So it comes as a surprise that some Texas legislators are advancing a tax hike this session, including the chairman of the House Ways and Means committee.
The tax hike, House Bill 2889, would drive up costs when you go online or call a travel agent to book accommodations. It would apply the hotel tax to the small service fees agents charge, which adds new tax and compliance burdens.
It only gets more confounding when you consider the state, along with local governments, will get around $17 billion from the Biden bailout.
There was some overblown fear of a budget gap, but that gap is turning out to be far smaller than expected, and the state has federal cash lying around which further renders budget gap talk pointless.
It gets even worse when you consider the tax in question, is a tax on tourism.
This picks on a hospitality industry that has been absolutely crushed by the pandemic. Job loss in hospitality in Texas has been worse than any other industry, employment was down 23% from February 2020 to January 2021 (Private Enterprise Research Center at Texas A&M).
Not to mention, hiking taxes on booking travel would have a negative downstream effect on restaurants, trucking, retail shopping, and more.
Texas legislators should be on high alert, especially Senate Republicans, as the House threatens to moves this tax hike next week.
The good news, over 40 state legislators have signed the Taxpayer Protection Pledge committing to their constituents they will oppose all tax hikes.
The bad news, some of these pledge-signers are flirting with breaking their commitment – just to support an unjustifiable tax hike that picks on the industries most hurt by the pandemic.
Texas taxpayers should get on the phone and make sure their legislators are not falling for the tourism tax hike trap.
Photo Credit: Patrick Gensel
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FDA & Marvel’s "Mind Control Menace" is Comically Ludicrous, but Seriously Dangerous
This year, the U.S. Food and Drug Administration (FDA) has procured the assistance of Marvel Comics, the creators of countless famous characters including Captain America, Spider Man, and the Hulk, to spread fear-mongering propaganda about e-cigarettes to the masses.
This promotion is a part of FDA’s “The Real Cost” initiative, a costly government program that was recently renewed with a $900 million budget to be spent over the next five years.
With Marvel’s help, the FDA has introduced Mind Control Menace, a storyline that follows two teenagers, Javier and Amy, as they seek to rid their town of an unknown plague. The plague, which appears in the form of green vapor, specifically targets high school students, turning them into zombies, effectuated with terrifyingly empty, pale-green eyes.
This "menace”, clearly representative of e-cigarettes, possesses nearly all of Amy and Javier’s peers until the motivated teens invent a device that allows them to see into the future. Amy and Javier show their zombified classmates what their futures will look like should they continue to succumb to the mind-controlling menace.
Ironically, the teens use of science to “save the day” is reminiscent of how e-cigarettes were invented. While many anti-vaping advocates like to claim that vaping was invented by big tobacco, this could not be further from the truth.
The first vapor device was invented in America in 1963, but it wasn’t until 2001, in Beijing, China, that the world’s first e-cigarette was created. Hon Lik, a Chinese pharmacist and heavy cigarette smoker, had recently lost his father to lung cancer and was determined to quit the deadly habit himself.
Lik invented a vaporization system that combined non-toxic aerosol with nicotine concentrate, creating a device that mimics the habitual nature of cigarette smoking while removing the thousands of chemicals and tar that cause cancer and other severe illnesses.
Hon Lik used science to “save the day” and while Marvel’s Mind Control Menace is pure fiction, Lik’s invention is very much real and has helped countless smokers quit cigarette use, not just saving the day, but saving their lives.
As the story continues, Amy and Javier lead their classmates in defeating the plague by simply yelling “No” at the “menace” of vaping. This “Just Say No” style of messaging is evocative of D.A.R.E. (Drug Abuse Resistance Education) programs, popularized in the 1980’s as a means of combatting drug use among youths.
The “Just Say No” strategy has been universally accepted as a failure, with data indicating that the D.A.R.E. program did little to nothing to combat substance abuse among teens. A 2009 mathematical review of 20 different scientific studies further reinforced the scope of this failure, revealing that teens who enrolled in the D.A.R.E. program were just as likely to engage in drug use as those who received no drug-abuse intervention.
If drug addiction and substance abuse could truly be overcome by simply saying “No” then drug addiction would not be a problem in the United States. Yet 21 million Americans have at least one addiction and only 10% of those with an addiction receive treatment.
This troubling statistic is largely due to the stigma that surrounds drug addiction. Even as scientists have long reached the consensus that addiction is a complex brain disorder with intricate behavioral components, many in the public still view addiction as a consequence of moral weakness and flawed character.
Messaging like Mind Control Menace further reinforces this stigma by telling America’s youth that nicotine addiction is something that can simply be overcome by standing tall and valiant, puffing out your chest, and courageously saying “No” to addiction. It is then easily inferred that anyone who falls victim to addiction is clearly not brave enough, or smart enough, to stand up to addiction. This obvious and dangerous instance of victim-blaming will only make the issue of addiction worse.
Mind Control Menace also fails to consider a key aspect of any comic book and movie; the villain is half the intrigue. While superheroes are household names in America, so are their archrivals. Marvel’s anti-vaping propaganda will only further the curiosity that youth have regarding vaping.
What FDA & Marvel forgot, or chose to ignore, is that the 2019 National Youth Tobacco Survey found curiosity to be the most common reason school-age kids cited for trying e-cigarettes. The more curious kids are about vaping, the more likely they are to try it. Promoting messaging that will undoubtedly increase curiosity around vaping is both foolish and dangerous and is entirely the wrong approach for keeping youth away from e-cigarettes.
Rather, FDA could consider another approach, one that would keep e-cigarettes out of the hands of children while being truthful with them about the harms and benefits that e-cigarettes have. E-cigarettes are tools that help smokers quit, not a “menace” that controls your mind. They are proven to be 95% less harmful than combustible cigarettes and are more than twice as effective at helping smokers quit than traditional nicotine replacement therapies like nicotine patches or gum. E-cigarettes should be promoted as a safer alternative to cigarettes and a way of helping those who can’t quit cigarettes, not as an alien fog that turns teenagers into zombies.
It is difficult to discern which aspect of Mind Control Menace is most nonsensical. Could it be the massive $900 million price tag? Could it be the foolish “Just Say No” messaging that stigmatized addiction? Or could it be the notion that this fear-mongering misinformation will keep any teenager, even just one single teen, from trying e-cigarettes? There truly isn’t a right answer.
E-cigarettes don’t require some lifesaving scientific invention that will help people quit using them; they are that lifesaving scientific invention. It’s time we start treating them as such.
Photo Credit: Marvel
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ATR Releases Letter Supporting Senator Roy Blunt's EBITDA Bill
ATR President Grover Norquist today released a letter in support of Senator Roy Blunt's bill to prevent a tax hike exceeding $100 billion on American businesses deducting interest expenses. This legislation is cosponsored by Senators Rob Portman, James Lankford, and Jim Inhofe. If allowed to go into effect, this tax hike would harm businesses hit hard by the pandemic and would make the United States' deduction standard uncompetitive relative to foreign competitors.
All members of Congress should support and co-sponsor this legislation.
You can read the full letter here or below:
April 15th, 2021
Dear Senator:
I write in support of legislation introduced by Senators Roy Blunt (R-Mo), Rob Portman (R-Ohio), James Lankford (R-Okla.) and Jim Inhofe (R-Okla.) to prevent a tax hike on American businesses deducting interest expenses. If lawmakers fail to act, this deduction will narrow at the end of the year.
Currently, businesses can deduct net interest expenses (i.e. debt) up to 30 percent of earnings before interest, tax, depreciation, and amortization (EBITDA) under IRC section 163(j). However, effective 2022, this deduction is narrowed to 30 percent of earnings before interest and tax (EBIT).
Removing depreciation and amortization from the calculation of the deduction will reduce the value of the tax deduction, resulting in a tax hike for many capital-intensive taxpayers including manufacturing businesses.
Allowing the EBIT standard to go into effect could result in a tax increase exceeding $100 billion over the next decade. As noted by the Joint Committee on Taxation report analyzing the Tax Cuts and Jobs Act (which first instituted the interest limitation), the EBITDA standard raises $90 billion in revenue in the first five years, while the EBIT standard raises $163.2 billion. Approximating this difference over the ten-year window would imply that failing to pass Sen. Blunt’s bill would result in a tax hike of at least $140 billion over the next decade.
In addition, the EBIT standard could disproportionately harm businesses that have been hit hard by the Coronavirus pandemic. A 2020 study by Ernst and Young notes that the 163(j) limitation tends to increase taxes on businesses during economic downturns because they are more likely to report lower income and higher interest expense. Given we are still recovering from an economic downturn due to the Coronavirus pandemic, making the EBITDA standard permanent is more important than ever.
Finally, an EBITDA standard is globally competitive whereas an EBIT standard would harm American businesses relative to foreign competitors. According to the Tax Foundation’s International Competitiveness Index, many foreign countries including the United Kingdom, France, Germany, Korea, and Mexico utilize an EBITDA standard for their interest deduction limitations. Maintaining this EBITDA standard will therefore help American manufacturers and other businesses compete with foreign businesses.
I urge you to support Sen. Blunt’s legislation to make the EBITDA standard permanent for calculating interest deductions. This legislation will prevent a tax hike exceeding $100 billion from going into effect, will ensure American businesses have a tax code on par with foreign competitors, and will help businesses with cashflow coming out of the pandemic.
Onward,
Grover G. Norquist
President, Americans for Tax Reform
Photo Credit: Gage Skidmore
List of Tax Hikes Supported by Virginia Candidate for Lieutenant Governor Glenn Davis
In the heavily contested race for the Republican nomination for Lieutenant Governor this year in Virginia, voters should beware: Delegate Glenn Davis has a history of voting to raise taxes and grow government.
Here are just a few of the billions of dollars in tax hikes he has supported during his time as a Delegate to the General Assembly and City Council-member:
Sales Tax Hikes
Six Percent Sales Tax Increase Statewide (HB 2313, 2013);
Twenty Percent Sales Tax Increase in Northern Virginia and Hampton Roads (HB 2313, 2013);
Gas Tax Hikes
Statewide Gas Tax Increase (HB 2313, 2013);
Targeted Hampton Roads Gas Tax Increase (HB 2313, 2013);
Targeted Central Virginia Gas Tax Increase (HB1541, 2020)
Real Estate Tax Hikes
Northern Virginia Real Estate Recording Tax Increase (HB 2313, 2013);
Virginia Beach Real Estate Tax Increase (Virginia Beach's 2013 City Budget);
Hampton Roads Grantors Tax Increase (HB1726, 2020)
Hotel Tax Hikes
Two Percent Hotel Occupancy Tax Increase (HB 2313, 2013);
Car Tax Hikes
Car Titling Tax Increase from 3 to 4.14 Percent (HB 2313, 2013);
Personal Property Tax Increase on Cars from $3.70 to $3.80 per $100 of Value (James Spore, Resource Management Plan, 2010);
New Internet Taxes
New Tax on Internet Purchases (HB 1501, 2017);
Davis filed legislation in 2017 to tax internet sales, a move that could have raised taxes by more than $250 million a year (Fiscal Impact Statement, Department of Taxation).
But wait, there's more. Delegate Glenn Davis supported Obamacare expansion in Virginia. When his colleagues were rejecting the misguided expansion of Medicaid for able-bodied adults, Davis was penning op-eds and spending his time arguing, "We take the money, or it goes someplace else."
Delegate Glenn Davis is not a mainstream conservative. He's out of touch with the real needs of taxpayers.
Unlike Winsome Sears and Tim Hugo, also contenders for Lieutenant Governor, Davis refuses to sign the Taxpayer Protection Pledge, a written commitment to you, Virginia voters, to oppose even more tax increases. Can taxpayers trust Davis as Lieutenant Governor? On May 8th, they'll have the chance to decide.
Grover Norquist on the Importance of a Competitive Corporate Tax Rate
ATR President Grover Norquist joined Jacqueline Alemany on Washington Post Live to discuss President Biden’s proposed tax increases and his more than $4 trillion infrastructure plan.
During this conversation, Norquist discussed the success of lowering the corporate income tax rate in the Tax Cuts and Jobs Act, which led to the lowest unemployment rate in 50 years, immense economic growth, and a substantial rise in the median income.
Norquist explains how lowering the corporate income tax rate helped lower the unemployment rate to historic levels:
"When the Republicans cut taxes, we took the highest corporate rate in the world, 35 percent, all the rest of the world had lowered their corporate rates below 35 percent and they were getting stronger economic growth as a result. We were still at 35 percent, 10 points higher than communist China. What happened when the Republicans cut individual rates, rates on small business, rates on corporations?
We went to the lowest unemployment in 50 years, 3.5 percent; this is 2019. We went to the lowest poverty rate in 50 years. Everything that the liberals said they want to do with big spending programs was actually achieved. The bottom quarter earners got larger raises than the top quarter earners in the economy."
Norquist explains how the Tax Cuts and Jobs Act spurred economic growth and raised wages:
"So, for everything from equity to jobs to creation, compare it to the rest of the world. The U.S. growth in 2018 was 2.9 percent; that was twice Germany's, which was 1.5 percent; more than twice Britain's.
We were not only out-competing--in one year, one year alone, 2019, the median income, which is the median income, family income, half people make less, half the people make more. Bill Gates making a billion dollars doesn't move the median. The median income, in that one year alone, increased 6.8 percent, or $4,440; $4,000 raise for the median income. That means tens of millions of Americans saw their income increase by those amounts. That compares to, oh, during the Obama years, in eight years, Obama increased it 5 percent. In one year, the lower rates in 2019 increased the median income 6.8 percent, or over $4,000. By the way, almost exactly what the Republican economists in the White House predicted would happen if you cut taxes and more capital, more investment per worker flooded in."
Norquist explains how Biden's tax hikes will harm Americans' 401(k) accounts:
"But think about the owners of capital, if you have a 401(k), your 401(k) will be worth less because it's a higher corporate rate, and 53 percent of American households have a 401(k); 53 percent of Americans do not make more than $400,000 a year. Biden is going right for the middle class, right for the upper middle-class and that 400,000 is a dead letter and never amount to anything, and certainly doesn't mean anything now."
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Iowans Will Get Stuck with Higher Utility Bills Due to Biden Corporate Tax Rate Hike
If Biden and the Democrats enact a corporate income tax rate increase, they will have to explain why they just increased your utility bills
If President Biden and congressional Democrats hike the corporate income tax rate, Iowa households and businesses will get stuck with higher utility bills. Democrats plan to impose a corporate income tax rate increase to 28%, even higher than communist China's 25%.
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, including at least four Iowa utilities.
Working with the Iowa Utilities Board, Iowa American Water Co., MidAmerican Energy Company, Black Hills Energy and Alliant Energy passed along tax savings to customers.
Alliant Energy: As noted in this April 13, 2018 DEI excerpt:
Alliant Energy announced this week that it will pass savings from lower federal taxes on to its customers in Iowa.
Annual savings, including tax-related savings from Alliant Energy’s transmission providers, are expected to be approximately $75 million, the company said.
“These tax savings are great for our Iowa customers and the new, lower corporate tax rate will benefit our families, businesses and communities today and in the future,” Doug Kopp, president of Alliant Energy’s Iowa energy company, said. “In the last six years, we’ve delivered about $500 million in other separate tax-related savings to customers, reducing energy costs.”
Typical residential electric customers will see an annual savings of approximately $50 to $60. Typical residential natural gas customers will see annual savings of approximately $30
Iowa American Water Co.: As noted in this Jan. 29, 2018 Des Moines Register article excerpt:
And Iowa-American Water Co., which provides service in eastern Iowa, would provide $1.5 million and $1.8 million to customers.
MidAmerican Energy Company: As noted in this April 5, 2018, Quad-City Times excerpt:
"A big part of the tax reform is the corporate income tax rate changing from 35 to 21 percent," said MidAmerican spokeswoman Tina Hoffman. "That is what the $42 million represents, with 100 percent going back to the customers."
The company expects to distribute $33 million on electrical bills and $8.8 million on natural gas bills. The total also includes annual savings for commercial and industrial consumers: $75 in electricity, $25 in natural gas for commercial customers and $8,000 in electricity, $175 in natural gas costs for industrial customers, she said.
In addition, Hoffman said MidAmerican expects to save another $40 million to $50 million in 2018 from other tax-related benefits including new provisions related to how companies account for excess accumulated deferred taxes and depreciation. The utility plans to create an account to capture these benefits and use them to reduce the size or need for a future rate case in Iowa.
Black Hills Energy: As noted in this April 27, 2018 Iowa Utilities Board statement:
The Iowa Utilities Board issued multiple orders this week approving an estimated $78.7 million in savings for utility customers based on the IUB’s investigation and review of the tax refund proposals filed with the IUB by MidAmerican Energy, Alliant Energy-Interstate Power and Light, and Black Hills Energy regarding the 2017 federal tax reform law.
The IUB opened an investigation into the impact of the federal Tax Cut and Jobs Act of 2017 on Iowa’s rate-regulated utilities in January 2018, Docket No. INU-2018-0001. The utilities’ tax refund proposals detailing how customers would benefit are a result of this investigation. The new tax law reduced the federal corporate income tax rate from 35 percent to 21 percent.
The following tax refund proposal tariffs were approved by the IUB, subject to complaint or investigation:
Black Hills Energy will return an estimated $2.2 million to its natural gas customers in Docket No. TF-2018-0037.
Conversely, a vote for a corporate income tax rate hike is a vote for higher utility bills as households recover from the pandemic.
Many small businesses operate on tight margins and can't afford higher heating, cooling, gas, and refrigeration costs. President Biden should withdraw his tax increases.
International Reference Pricing Would Harm American Patients, Workers, and the Healthcare System
President Joe Biden is expected to release a “human infrastructure” plan in the coming weeks that spends as much as $2 trillion. This proposal will likely include new tax increases and foreign price controls on American medicines that will harm patients, manufacturers, and the American healthcare system.
House Democrat lawmakers want to include H.R. 3, “the Lower Drug Costs Now Act,” legislation they pushed last Congress that would impose international reference pricing. This policy will set U.S. prices based off the prices in six countries - Australia, Canada, the United Kingdom, France, Germany, and Japan. These price controls are enforced by a 95 percent excise tax on medicines.
If included into the Biden infrastructure plan, international reference pricing would lead to healthcare shortages, threaten American jobs, and crush medical innovation.
Foreign countries have significant healthcare shortages. These countries utilize socialist price controls on their healthcare systems. Because there is no way to compete on price, supply is reduced, which means reduced access to care for citizens in these countries.
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.
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.
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.
Price controls utilized by Europe delayed new drugs coming to market by an average of 14 months.
Reference pricing will threaten the development of new medicines. As it stands, developing new medicines is a time consuming and expensive process, as noted by the Congressional Budget Office. It takes up to $2 billion and ten years to develop new medicines and only 12 percent of drugs that enter clinical trials ultimately make it onto the market. Manufacturers make this steep investment knowing they will be able to recoup the extensive costs involved.
Costs for developing new medicines includes laboratory research and clinical trials of drugs as well as expenditures on medicines that that do not make it past these stages. The clinical development and approval times alone average 90.3 months for a pharmaceutical drug and 97.3 months for a biologic.
Because of the steep investments required, research and development spending averaged 25 percent of net pharmaceutical revenues in 2018 and 2019, totaling roughly $80 billion each year.
Not only does this investment make the U.S. a world leader in medical innovation, but it also ensures we have high paying manufacturing jobs. 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 employee in 2017 was $126,587, which is more than double the average private sector wage of $60,000. President Biden has repeatedly promised to create millions of new high paying manufacturing jobs in America. He must ensure that his policies do not cause the loss of existing jobs.
Adopting foreign price controls through an international reference pricing plan would harm American patients, workers, and the healthcare system. This policy has no place in Biden’s infrastructure bill and should be rejected by lawmakers.
Photo Credit: Darko Stojanovic
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