Oklahoma Legislators Should Reject Devastating Tax on Vaping
Americans for Tax Reform wrote to Oklahoma legislators today in opposition to HB 2876 which would increase taxes on life-saving reduced risk tobacco alternatives such as e-cigarettes.
ATR Director of Consumer Issues, Tim Andrews, wrote:
"This anti-science bill would have a devastating impact on public health throughout the State, and lead to an increase in tobacco-related deaths. Further, aside from the public health harm caused by increasing taxes on a product proven to save lives, this bill would also cause considerable economic harm, particularly given the present pandemic-related economic downturn."
Andrews noted the ever-growing body of research showing vapor products are an effective harm reduction tool for adults looking to quit smoking: "E-Cigarettes are proven to be 95% safer than combustible tobacco and more effective than any other quit smoking aid. Extrapolating from a large-scale analysis by the US's leading cancer researchers and coordinated by Georgetown University Medical Centre, if a majority of smokers in the state of Oklahoma made the switch to vaping, close to 100,000 lives would be saved. In seeking to tax these life-saving products, these bills place lives in jeopardy.
HB 2876 not only fails to incentivize smokers to quit their deadly habit, it actively punishes them for doing so. Andrews noted that "As the price of a product increases, at its use decreases. In previous instances, levying taxes on vaping products has been proven to increase smoking rates as people shift back to deadly combustible cigarettes. Minnesota is serving as a case study on this already. After the state imposed a tax on vaping products, it was determined that it prevented 32,400 additional adult smokers from quitting smoking. Small increases in projected revenue should never come at the expense of human lives.”
The full letter can be read here.
Photo Credit: Vaping360.com
VIDEO: Broadband Doesn’t Need One Size Fits All Approach
Earlier this month, ATR President Grover Norquist joined Jacqueline Alemany on Washington Post Live to speak about President Biden’s $2 Trillion infrastructure deal.
A large part of Biden’s plan includes dumping billions of dollars to support the deployment of municipally owned fiber optic networks. This approach would do nothing to close the digital divide but rather waste taxpayer dollars repurposing the broadband networks of urban areas who already have high-speed and quality internet connections.
Grover Norquist:
They want to do broadband because they’ve decided broadband is the future. Somebody didn’t tell them about satellites, somebody didn’t tell them about 5G. And so they are taking yesterday’s technology and deciding that everybody’s got to have this one size fits all approach; as opposed to subsidizing those people in the rural areas who really need it because of the increased time it takes to get internet. Or you might think that it makes more sense to use satellites which are being put up right now to solve some of these problems.
You can watch the video above or click HERE to watch it on our YouTube page.
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Democrats’ 25% Federal Corporate Rate is Uncompetitive, Higher than China
Several Senate Democrats are pushing to raise the federal corporate income tax rate to 25 percent in Biden's upcoming infrastructure plan, according to an Axios report:
"The universe of Democratic senators concerned about raising the corporate tax rate to 28% is broader than Sen. Joe Manchin, and the rate will likely land at 25%, parties close to the discussion tell Axios."
A 25 percent federal corporate rate would still leave the U.S. uncompetitive compared to the rest of the world.
The U.S. federal corporate tax rate is 21 percent. However, states also levy their own corporate tax rates, averaging an additional 6 percent. Because this state tax is deductible when paying the federal corporate rate, the combined national and subnational rate averages out to 25.77 percent.
A 25 percent federal rate would therefore result in a combined federal and state rate of 29.5 percent, higher than Communist China and higher than the average OECD rate.
OECD average national + subnational rate: 23.51%
China’s rate: 25%
U.S. national + subnational rate IF Democrats raise federal rate to 25 percent: 29.5%
Workers, consumers, and shareholders will bear the burden of an increased corporate tax rate. Such a hike will cause businesses to invest less in the United States and more overseas, resulting in fewer job opportunities and lower wages for American workers:
- A Treasury Department study estimated that “a country with a 1 percentage point lower tax rate than its competitors attracts 3 percent more capital.” This is because raising the corporate rate makes the United States a less attractive place to invest profits.
- According to the Stephen Entin of the Tax Foundation, labor (or workers) bear an estimated 70 percent of the corporate income tax in the form of wages and employment. As Entin notes, 50 percent, 70 percent, or even 100 percent of the corporate tax is borne by workers.
- A 2012 Harvard Business Review piece by Mihir A. Desai notes that raising the corporate tax lands “straight on the back” of the American worker and will see a decline in real wages.
- A 2012 paper at the University of Warwick and University of Oxford found that a $1 increase in the corporate tax reduces wages by 92 cents in the long term. This study was conducted by Wiji Arulampalam, Michael P. Devereux, and Giorgia Maffini and studied over 55,000 businesses located in nine European countries over the period 1996-2003.
- Even the left-of-center Tax Policy Center estimates that 20 percent of the burden of the corporate income tax is borne by labor.
Raising the corporate rate to 25 percent, as some Democrats are calling for, would leave America with a rate higher than many foreign competitors and harm American workers, businesses, and investment.
Photo Credit: U.S. Secretary of Defense
Minnesota Legislators Must Reject SF 2301 to Protect Public Health
Earlier today, Americans for Tax Reform contacted members of the Minnesota Senate Committee on Taxes, urging them to reject SF 2301, legislation that would increase the tax rate on life-saving reduced harm tobacco alternatives like e-cigarettes and other vapor products. SF 2301 also seeks to raise the tax rate on tobacco products, a policy that would disproportionately harm Minnesota’s most vulnerable populations while doing nothing to reduce smoking rates.
Tim Andrews, Americans for Tax Reform’s Director of Consumer Issues, noted that SF 2301 would intensify past public health mistakes made by the Minnesota legislature, writing, “the National Bureau of Economic Research determined that Minnesota’s tax on vaping products, prevented 32,400 additional adult smokers from quitting smoking. This entirely self-inflicted public health disaster caused by the Minnesota Legislature will be further compounded if this bill is enacted.”
Andrews also pointed out the negative effects of tobacco tax hikes, remarking that “data from the National Adult Tobacco Surveys has consistently demonstrated that tobacco tax increases have no statistically significant impact on the prevalence of smoking among those with household incomes of less than $25,000. Seventy-two percent of smokers are from low-income communities and increasing taxes on people unable to quit will put unnecessary hardship upon families who are already struggling to make ends meet.”
Acknowledging the overwhelming body of scientific research that shows e-cigarettes to be over 95% less harmful than traditional cigarettes and more than twice as effective at helping cigarette smokers quit than other nicotine replacement therapies, Andrews wrote, “the Minnesota Legislature should embrace new methods that are proven to help reduce smoking rates, and facilitate smokers quitting through reduced risk tobacco alternatives such as e-cigarettes. To tax safer products at such a high rate, thereby driving people to more deadly alternatives, goes against every principle of sound public or health policy. Small increases in projected revenue should never come at the expense of human lives.”
The full testimony can be read here.
Photo Credit: Doug Kerr
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Ohio House School Funding Plan Would Lock In Massive Bills for Taxpayers
Ohio legislators are on the verge of falling into a trap on education funding that would stick taxpayers with future tax hikes to fund big pay for teachers’ unions.
As they consider the next two-year budget, lawmakers must wrangle with education funding. Expanding school choice options has been a priority in recent years, and a worthy one at that. It has never been more clear that parents need control when it comes to choosing where and how their children are educated.
As legislators aim at a new school funding formula that will serve expanding school choice, they must take care that the formula does not lock in more spending growth than Ohio taxpayers can afford. That would lead to tax hikes.
Unfortunately, the proposal being advanced by the Ohio House of Representatives would do just that. Worse, it would lock in unaffordable spending levels by giving teachers unions power to drive up costs for the state.
House Bill 1 is the school funding bill, now part of the House’s biennial budget, HB 110. The legislation would increase school aid from the state, for traditional school districts it would go up by nearly 24% compared to current law.
That is a significant amount of spending and worth a closer look by taxpayers even if it can be paid for by naturally rising revenues or changes in spending priorities. But these numbers don’t even represent the full cost of HB 1. They only reflect what the cost of HB 1 might have been in 2018, without additional funding for economically disadvantage children.
You may have noticed it is 2021, not 2018, presumably Ohio representatives also are aware of this. So why are they using old, 2018 numbers for district costs and salaries to inform a formula that will go into effect in 2022?
Whatever the reason, an already significant increase in aid spending (24% for traditional districts) is actually a lowball figure. It’s based on old school district costs. It also does not take into account ongoing analysis of how to aid economically disadvantaged students, which will add more guaranteed spending to state aid.
In short, old data on school district spending, and outstanding recommendations on additional aid for students from low-income families will significantly drive up the projected cost of the new school aid formula.
Taxpayers don’t know the true cost, but if this version of the funding formula passes, they will be on the hook for whatever that cost ends up being. If the state tries to go under the formula, school districts will be able to sue to get money to fill any such gap. Since their costs and salaries are under their control and feedback into the formula to demand more aid, districts can drive up costs for state taxpayers.
Legislators who support this version of the school aid formula are locking Ohio taxpayers into paying far higher aid costs than they do today, and empowering teachers unions to keep driving those costs up. On top of that, future demands for additional school funding will be made on top of the ever-rising baseline guaranteed by the formula. Before deciding on a final formula, legislators should address these concerns, and be clear on what the state will actually end up spending.
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Norquist on Texas HB 2889: New Tax Will Make Texas Travel More Expensive, Hit Small Businesses Battered by Pandemic
On NewsRadio 740 KTRH today ATR President Grover Norquist sounded the alarm on Texas House Bill 2889:
KTRH host: "Travel industry looking to rebound from Covid -- Texas lawmakers though quietly advanced a bill to tax your use of travel agencies. Grover Norquist with Americans for Tax Reform says that HB 2889 would just be an additional cost passed on to you."
Norquist: "If you go to a hotel and you go through an online travel agency, you'll pay an additional fee. It's a new additional tax that will make it more expensive for people to go to hotels -- and hotels and restaurants have really been hit hard by Covid and the pandemic."
KTRH: "Norquist says Lieutenant Governor Dan Patrick shot down a similar measure last session. He hopes that the Lieutenant Governor will do it again this year."
Click here or below to hear the audio clip.
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.
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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