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Podcast: Taxes and Regulations Will Stifle Growth of Life-Saving Electronic Cigarette Industry

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Posted by Paul Blair on Friday, February 19th, 2016, 4:49 PM PERMALINK

In a recent episode of the Tech Policy Podcast with Tech Freedom, Americans for Tax Reform's Paul Blair discussed the pending federal regulations that stand to cripple the electronic cigarette and vapor product industry. Discussions include the public health benefits of e-cigarettes, efforts in the states to raise taxes on them, and the status of looming regulations by the Food and Drug Administration. What's next? Who is impacted? What can vapers do? All of this and more in Episode 17 of the Tech Policy Podcast.

Click here for the most up-to-date map of excise tax threats in the states. 

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ATR Supports Change in Predicate Date for New Tobacco and Vapor Products

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Posted by Paul Blair on Tuesday, November 24th, 2015, 4:04 PM PERMALINK

Today, Americans for Tax Reform sent a letter to members of Congress urging them to change the predicate date at which new tobacco and tobacco-derived products like premium cigars and electronic cigarettes must undergo expensive and unnecessary regulatory hurdles imposed by the Food and Drug Administration (FDA).

Without Congressional action, the FDA will require all products that have hit the market since February of 2007 to undergo a Pre-Market Tobacco Applications (PMTA) process that could cost upwards of several million dollars per product simply to undergo review.

In 2009, the Tobacco Control Act (TCA) established a predicate date of February 15, 2007 at which all new tobacco and tobacco-derived products must establish “substantial equivalence” to products sold before then in order to avoid an expensive and lengthy pre-approval process by the FDA.

Because of the speed at which innovation has occurred with vapor products since that time, essentially all products currently being sold to consumers fall into this regulatory trap. The process of obtaining FDA approval to continue to be sold isn’t only expensive; it may not actually be possible given the lack of clarity and available data being demanded of each business for each product.

Congress must act to permit innovation to continue for these smoking cessation products that stand to save millions of lives and billions of tax dollars resulting from harm reduction associated with smokers making the transition to tobacco-free alternatives like e-cigarettes.

 

Below is a full text of the letter:

Dear Member of Congress,

I write today in support of efforts to save the thousands of small businesses in the United States who are selling tobacco-free technology products to adult consumers trying to kick their smoking habit. Though reliant on the sale of tobacco products for billions of tax dollars annually, Congress should help facilitate all efforts by the free market to accomplish what stiff regulations and taxes never could, getting smokers to quit for good.

Unfortunately, without Congressional action, an overreaching Food and Drug Administration (FDA) will proceed with an arbitrary bureaucratic hurdle for the sale of vapor products more akin to prohibition than reasonable regulation. Unable to regulate tobacco products until 2009, the Tobacco Control Act (TCA) established a predicate date of February 15, 2007 at which all new tobacco or tobacco-derived products must establish “substantial equivalence” to products sold before then in order to avoid an expensive and lengthy pre-approval process by the FDA.

Without Congressional action, the FDA pre-approval process will cost upwards of several million dollars per product, a cost affordable to none other than the large tobacco companies, for products already being sold to consumers. Since 2007, significant innovation in the electronic cigarette and vapor product category has occurred, meaning nearly 99% of the life-saving vapor products on the market will cease to exist.

This burdensome regulatory hurdle also stands to harm producers and retailers of cigars, pipe tobacco and dissolvable tobacco.

Amending the predicate date established in the Tobacco Control Act for new products will do nothing to impede upon the FDA’s general efforts to regulate this product category. In fact, grandfathering in all of the products currently being sold to consumers, will save the agency at least two year’s worth of paperwork and allow them to focus on encouraging good manufacturing practices, among other things.

A predicate date change to the date of FDA deeming regulation enactment will simply allow innovation to continue, without decimating an entire market of smoking cessation products and the consumers who use them.

In testimony to the Senate Commerce Committee last June, Matthew Myers of the Campaign for Tobacco-Free Kids explained, “Responsibly marketed and properly regulated, e-cigarettes could benefit public health if they help significantly reduce the number of people who smoke conventional cigarettes and become sick and die as a result.” He explained further that if properly regulated, “I don’t think there is any doubt that there would be a reduction in harm,” from smokers who switched to e-cigarettes. He is absolutely right on this point.

A recent Centers for Disease Control (CDC) survey suggests that there are more than 9 million adult consumers of vapor products in the United States. This represents the greatest accomplishment in public health in decades and is due entirely to the free market. This rise corresponds with a significant decline in smoking rates among Americans and is no coincidence.

That is why I support a change in the 2007 predicate date, which would permit products currently being used by consumers to quit smoking to continue to be sold. This very reasonable step has been put in legislative language authored by Rep. Tom Cole (R-Okl.) in the form of H.R. 2058 and exists in similar form in an amendment made to the House Appropriations Rural Development, Food and Drug Administration and Related Agencies agriculture appropriations bill earlier this year.

Unlike smokers, adult vapor product consumers are becoming single-issue voters who correctly attribute their switch from combustible tobacco products to smoke free alternatives like e-cigarettes to saving their lives. To crush this new and emerging industry would reverse decades of efforts to get people to quit smoking.

I urge Congress to amend the Tobacco Control Act predicate date for the tobacco-derived products in the electronic cigarette and vapor product category in an effort to protect public health and protect American jobs. Such a change in the predicate date would not interfere with the short-term goals of responsibly regulating the products; it would simply help avoid the looming economic and public health disaster associated with status quo prohibition.

Sincerely,

Grover G. Norquist ​


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Vapers Remain Top Target of Lawmakers and Bureaucrats

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Posted by Paul Blair on Tuesday, August 18th, 2015, 3:04 PM PERMALINK

In my last podcast with ATR president Grover Norquist, we discussed the newest target of tax hikes at the state level. The new “sin,” an alternative to combustible cigarettes, is vaping, or the use of electronic cigarettes.

Click here to listen to our January podcast, “The Grover Norquist Show: Leave Vapers Alone!”

With nearly every state legislative session coming to a close, Grover and I re-examined the status of e-cigarette taxation at the state level and the looming threat of Food and Drug Administration (FDA) over-regulation. In this podcast, we preview the two temporary Congressional pathways to prevent the prohibition of the products currently on the market.

Click here to learn more about one of those solutions, Rep. Tom Cole’s H.R. 2058.

We last examined the lay of the land in January of this year. At the time, I predicted 25-30 states would look to raise taxes on e-cigarettes and vapor products and wrote about the trend in Forbes, which you can read here. Listen to the podcast to see if my predictions were correct!

Click here to support our efforts to fight higher taxes and unnecessary regulations on e-cigarettes and vapor products.

Photo Credit: Vaping360.com

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Cigarettes: A Case Study in the Slow Rise of Excise Taxes


Posted by Paul Blair on Monday, March 30th, 2015, 1:26 PM PERMALINK

The 18th century English writer Dr. Samuel Johnson defined excise taxes as "A hateful tax levied upon commodities, and adjudged not by the common judges of property, but wretches hired by those to whom excise is paid." In the midst of ongoing debates about tax hikes on tobacco cigarettes, liquor, soda, and vapor products, this seems relevant. 

Over the last two years, a new target for the public health wretches has emerged, replacing the long-standing number one target of sin taxes aimed at extracting money from low-income consumers. Electronic cigarettes and vapor products are disruptive, innovative, technology products that are accomplishing what the public health community never could - they're getting people to quit smoking. Some estimates and national surveys suggest that more than six million people in the United States are daily vapers. This comes at a time when cigarette smoking rates are among the lowest they've been in years. 

In 2014, 15 states considered proposals to tax vapor products like tobacco products with taxes as high as 95 percent. Alternative proposals, like those on the books in North Carolina, subject vapor products to a smaller tax of $.05 per mL of liquid nicotine. A proposal in Arkansas this year would do the same thing. 

A recent history of cigarette tax increases should provide some insight into the future of e-cigarette and vapor product taxes, should more states add excise taxes to the books with regards to the products. As we at ATR have noted before, e-cigarettes should not be taxed like tobacco products. Currently, only Minnesota and North Carolina impose sin taxes on the products - with Minnesota taxing them at 95 percent, up 75 percent from two years ago. 

But what about smaller taxes, less than 75, 95, or 50 percent? A look at cigarette tax hikes since 2000 may shed light on the threat of accepting such proposals. 

The average excise tax on a pack of cigarettes in 1999 was 38.9 cents. Today, the current average excise tax is $1.54 per pack. States have increased tobacco taxes about five times as often as they have raised alcohol taxes between 2000 and 2015, with 111 increases over that time according to the National Association of State Budget Officers


Source: NASBO

Click here for a list of every statewide cigarette tax hike between 2000 and 2015. 

As you can see, the years during and immediately following a recession saw the largest number of cigarette tax increases. In 2003, 19 states increased tobacco taxes; 15 in 2004 and 16 in 2010. 

What does any of this have to do with e-cigarettes and vapor products? Many state legislators have begun to realize that their increasing reliance on tobacco revenue to fund a wide range of programs may have been a bad bet. With declining cigarette revenue, states stand to lose (and are) billions of dollars in tax dollars. One would hope this could be celebrated, as less and less people are smoking but many legislators are clearly more concerned with compensating for this declining and lost revenue. And not in public health. 

E-cigarettes are the new target. Click here to view a map of the tax threats in the states. 

The rise in cigarette excise taxes over the past 15 years should provide a warning to those who think once a tax is on the books in a state, there won't be efforts to raise it slowly over time. Minnesota's tax on e-cigarettes began at 75 percent and is now 95 percent. Some taxes are far more damaging than others. But the fact remains, it is much easier to fend off new taxes than to fight higher taxes. Just ask smokers. 

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The Grover Norquist Show: Leave Vapers Alone!

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Posted by Paul Blair on Wednesday, January 7th, 2015, 5:31 PM PERMALINK

As I've written before, the top target for tax increases at the state level in 2014 was electronic cigarettes and vapor products. Politicians, looking to protect their monopoly on cigarette sales and compensate for declining tobacco revenues again have e-cigarettes in their sights in 2015. 

Raising the cost of products that will unquestionably save lives makes little sense at face value. To do so in the name of filling budget holes, "protecting children," or simply expanding the definition of tobacco products is even worse. 

Today, I sat down with Grover Norquist to discuss these new innovative products and some of the states where politicians will try to raise taxes on e-cigarettes in 2015. 

What do you think? Should states raise taxes on electronic cigarettes? 

Consider supporting our efforts to fight back with a generous gift today

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Indiana Attorney General Greg Zoeller Pushing Tax Hike on Electronic Cigarettes

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Posted by Paul Blair on Monday, January 5th, 2015, 4:55 PM PERMALINK

State Representatives Ed Clere (R-Ind.) and Charlie Brown (R-Ind.) are cosponsoring a bill in the legislative session that begins Tuesday that would raise taxes on electronic cigarettes. These efforts coincide with Indiana Attorney General Greg Zoeller’s campaign to tax and regulate the products as well.

According to Rep. Clere, the tax “would be 24 percent of whatever the wholesale price is,”which would mean electronic cigarettes and vapor products would be subjected to the same taxes as smokeless tobacco and other tobacco products.

As we’ve noted before, electronic cigarettes should not be taxed the same as traditional tobacco. These products do not contain tobacco and should not be treated as such.

Attorney General Zoeller is spearheading efforts in the state to regulate and tax the products. In his attempt to “save the kids” from electronic cigarettes, Zoeller (and legislators who support the Clere-Brown legislation) are using the heavy hand of government to pick winners and losers. By raising the cost of these products, the legislature would create an incentive for people to continue smoking traditional tobacco.

An NBC affiliate in NBC pointed out, “The hope is the price increase will make the product less appealing to price-conscious youth.” Unfortunately, this narrow-minded approach neglects that adult smokers are overwhelmingly low and middle-income consumers, many of which spend a quarter of their income on cigarettes. Despite the fact that four out of five people who smoke want to quit, not all are able to and price increases on effective smoking cessation devices like electronic cigarettes make little sense.

It’s not just kids who may decide to opt for cigarettes instead; it’s also all of the smokers in Indiana who may want to finally quit their unhealthy habit. This is bad tax policy and will hurt decades of efforts to curb smoking.

The free market has provided a solution to decades of failures by public health advocates to get people to quit smoking; electronic cigarettes and vapor products are working, unlike tax hikes and public service announcements. Using the heavy hand of the government to keep smokers smoking cigarettes is a distasteful approach to tax policy, especially in an overwhelmingly Republican-run state like Indiana.

We urge the legislature to reject tax hikes on electronic cigarettes.  

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Electronic Cigarettes Should Not Be Taxed as Tobacco Products

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Posted by Paul Blair on Sunday, January 4th, 2015, 8:00 AM PERMALINK

As nineteen states begin the 2015 legislative session this week, a hot topic of debate will be what to do about a new innovative technology that is gaining popularity among smokers looking for a way to quit. Electronic cigarettes (e-cigarettes) and vapor products have grown to a 2.5 billion dollar industry over the past few years, a concern for big government folks who want a piece of the action. 

As the Food and Drug Administration (FDA) and Democrats figure out how to regulate and tax the products, states haven't sat around waiting to see what happens in Washington, D.C.

Countless pieces of legislation in 2014 lumped e-cigarettes and vapor products into a the taxable category of “other tobacco products.” This would have subjected them to taxes as high as 95 percent of wholesale cost, which is how they are taxed in Minnesota. Every single one of the 2014 bills failed with the exception of one signed into law in North Carolina, which imposed a much smaller (but higher than present law) tax of 5 cents per mL of liquid per product (about 2.5 cents per e-cigarette).

E-cigarettes have been found to be far less harmful than traditional tobacco cigarettes. These products don't contain tobacco. That’s precisely why e-cigarettes should not be subjected to the same level of taxation as cigarettes, cigars, or any other type of smokeless tobacco. Tax increases that raise the price of e-cigarettes for consumers will discourage smokers from switching, an illogical act for anyone concerned about public health. State budget shortfalls fueled by overspending problems should never justify tax increases that will hurt decades of efforts to curb smoking in the United States.

Unfortunately, at least seven states already have bills pre-filed or drafted that would raise taxes on e-cigarettes. The governors of Washington and Utah have included tax hikes on the products in their official budgets to the legislature. The Attorney General of Indiana is pushing the legislature to raise taxes as well. Americans for Tax Reform opposes all tax increases and will work to defeat them as they arise.

Join our email list on the right hand side of this page or click here to contribute to our efforts to fight e-cigarette and vapor tax hikes in 2015. 

Photo Credit: www.vapour.co.uk

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ATR and AVA Oppose New E-Cigarette and Vapor Tax in Philadelphia

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Posted by Paul Blair on Thursday, October 16th, 2014, 3:19 PM PERMALINK

Today, Americans for Tax Reform President Grover Norquist and American Vaping Association President Gregory Conley sent a letter to the Philadelphia City Council in opposition to a proposal to raise taxes on e-cigarettes and vapor products. The bill, proposed by Councilwoman Blondell Reynolds Brown, would enact a new $2 tax on e-cigarettes and up to a $5 per purchase tax on e-liquids for vapor devices.

The letter reads as follows:

Dear Council Members,

We write today in opposition to all efforts to impose a new tax on e-cigarettes and vapor products in Philadelphia. These efforts come on the heels of a new $2-per-pack cigarette tax that went into effect just over two weeks ago.

A proposed bill by Councilwoman Blondell Reynolds Brown would enact a new $2 tax on e- cigarettes and up to a $5 per purchase tax on e-liquids for vapor devices. Hundreds of thousands of dollars in higher taxes will financially cripple new small businesses in Philadelphia. The small but growing segment of vapor specialty stores rely on the sale of these products as their sole source of revenue. To make the products sold in these stores uncompetitive will drive sales onto the Internet and outside of city limits.

That’s precisely why higher taxes don’t necessarily generate more revenue for the intended cause. Increasing public education's reliance on a volatile revenue source means that once businesses have been chased out of the city and sales go online, the city will be clamoring for even more revenue. This proposal is simply a placeholder for further tax hikes. This is particularly troubling in times of tepid economic growth and in light of the 20 new or higher taxes that have been imposed by Congress in the last few years.

Currently 44,000 students are on waiting lists for better performing charter schools. The problem lies not in lack of tax revenue for schools, but with the education system itself. Higher taxes will not rectify the achievement gap of Philadelphia students compared to those across the country and globe. Since the 2002-2003 school year, revenue for the school district has increased by over $1 billion to $2.97 billion. Meanwhile, there has been no improvement in testing scores since 2009, and a staggering 80 percent of students are not proficient in both math and reading.

The proposal to tax e-cigarettes would represent a massive step backwards for a city with the highest adult smoking rate among the U.S.’s ten major cities according to the CDC. A number of studies have shown that electronic cigarettes stand to improve health and prevent disease. This includes groundbreaking research by Dr. Igor Burstyn of the Drexel University School of Public Health on the chemistry of e-cigarette liquid and vapor.

By choosing to “vape” e-cigs instead of smoking traditional tobacco, consumers get their nicotine fix without the combustion and smoke, which are responsible for almost all of the negative health effects of tobacco cigarettes. Studies indicate that more and more smokers are abandoning the thousands of chemicals in traditional cigarettes in favor of smoke-free and tobacco-free e-cigarettes. Indeed, a recent study out of the United Kingdom that tracked nearly 6,000 smokers looking to quit found that the largest share of successful respondents had done so using e-cigarettes (20 percent), beating those who quit without help (15 percent) and those who used nicotine-replacement therapy such as gum or a patch (10 percent).

For decades, lawmakers have tried to mitigate smoking and the harm it causes through excise taxes and heavy regulation. However, with e-cigarettes, the free market has provided a solution to a problem that social engineers have not been able to address through stiff government regulations. The imposition of new taxes on these products perpetuates an issue lawmakers have spent so much time trying to eliminate, as studies show that almost all e-cigarette use is by smokers looking to significantly cut back or transition away entirely from their dependence on combustible cigarettes.

This e-cigarette tax hike is a shameless cash grab and should be rejected in favor of real reform.

Click here for a PDF of the letter. 

Americans for Tax Reform (ATR) is a non-partisan coalition of taxpayers and taxpayer groups who oppose all tax increases.

The American Vaping Association (AVA) is a nonprofit organization that advocates for the rapidly growing vaping and electronic cigarette industry. The AVA's membership is comprised of small- and medium-sized vapor businesses and has no ties to tobacco companies. The AVA is dedicated to educating the public and government officials about the growing evidence that e-cigarettes – battery-powered devices that heat a liquid nicotine solution and create an inhalable vapor – are harm-reduction products that effectively help smokers quit.

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E-Cigarette Tax Hikes Threaten State Revenue, Public Health

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Posted by Alexander Bobroske on Thursday, June 26th, 2014, 3:23 PM PERMALINK

A number of states over the past two years have attempted to impose new and higher taxes on e-cigarettes and vapor products. Though many legislative efforts have been thwarted, potential e-cigarette tax increases continue to pose a threat to state revenue, businesses, and public health.

States are scrambling to find new funding to replace the decline in tobacco tax revenue. Earlier this year the Surgeon General published a 980-page report predicting an eventual end to cigarette smoking in the United States. Whether those predictions come true or not, what’s clear is that as tobacco use declines, consumers are transitioning to healthier products like e-cigarettes. Higher excise taxes on these products will result in cross-border sales and even less revenue for states.

New and higher e-cigarette taxes are not serious public policy alternatives to declining tobacco revenue. The sale of these products is highly mobile due to the popularity of online sales. That’s precisely why state efforts to generate more revenue from these products are misguided. Massachusetts’s proposed 90% wholesale tax hike and Vermont’s proposed 92% would have crippled the industry and further harmed small businesses, like convenience stores, who are already suffering from a decline in tobacco related purchases had they become law.

For tobacco sales, tax evasion is a significant issue for states. The Washington Department of Revenue estimated $376 million in tax revenue was lost in 2012 due to tobacco tax evasion. A combination of tax evasion and higher online sales (not subjected to sales taxes) may become a growing issue for states if they impose higher in taxes on e-cigarettes and vapor products. States like Washington have taken note. The state Senate this year rightfully rejected a 95% tax on e-cigarettes and vapor products, preventing a further loss of revenue for convenience stores and brick and mortar vapor shops as a result of the fleeing of consumers across state lines.

Besides hurting taxpayers and diminishing state coffers, e-cigarette tax hikes also pose a threat to public health. Overtaxing products accredited to potentially saving lives makes little sense. In opposition to former New York Mayor Michael Bloomberg’s hypocrisy on public health for raising taxes on these products, ATR’s Patrick Gleason wrote:

Studies have shown that electronic cigarettes stand to improve health and prevent disease. By choosing to “vape” e-cigs instead of smoking cigarettes, consumers get their nicotine fix without the combustion and smoke — responsible for much of the negative health effects of tobacco cigarettes. For smokers already addicted to nicotine, e-cigs provide an alternative delivery mechanism that does not come with the proven harm that results from smoking.

Lawmakers like Bloomberg claim to champion public health and crusade against rising health care costs, yet they miss the irony of their contradictory legislation. While saying they seek to encourage smokers to successfully move away from tobacco products, their proposed higher taxes on e-cigarettes and vapor products are contributing to the high health care costs associated with a lifetime of smoking cigarettes. With e-cigarettes, neither tobacco nor second hand smoke poses a threat to anyone.

Despite the evidence staring them blankly in the face, there are still legislators and governors attempting to make money off of this growing industry. Democrats like Rep. Reuven Carlyle (D-WA) vow to revive failed attempts in future legislative sessions for tax hikes. ATR encourages Ohio, New Jersey, and legislators across the country to kill all bills aimed at increasing e-cigarette and vapor product taxes. These tax hikes will not result in new revenue, but instead declining economies.

 

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Daily Media Spotlight for June 13, 2014

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Posted by Zoe Crain on Friday, June 13th, 2014, 10:57 AM PERMALINK

The Daily Caller published an op-ed written by Americans for Tax Reform state affairs manager Paul Blair, detailing his experiences at The World Vapor Expo and Electronic Cigarette Show.

Earlier this year the FDA announced that they would be considering a new set of regulations for the e-cigarette and vapor industry over the next year or so. Among the list of possibilities includes requiring standardization of the products, a disclosure of ingredients, and mandated childproofing. It may also require proof that the new products present a public health benefit before being approved. At a minimum, the FDA could codify the definition of these products similar to that of Other Tobacco Products, or OTPs as they’re known in many state tax classification laws. This last regulation presents the biggest danger. These products are not OTPs; in fact, many of the juices contain no nicotine whatsoever. It should be common sense that similar to the nicotine patch, these smoking cessation devices are not remotely similar to snuff, pipe tobacco, roll your own cigarettes, etc. Unfortunately for the FDA, when they tried to ban them as “drug-device combination products” in 2009, a federal court shut them down.

Chloe Johnson of the Washington Times wrote an article regarding the upcoming fight to prevent reauthorization of the Export-Import Bank.

Critics like the Heritage Foundation, however, say Ex-Im loans are a form of “corporate welfare” and that the bank, established by President Roosevelt in 1934, should be abolished. Americans for Tax Reform is one of 30 groups, also including Heritage, that recently signed a letter to Congress opposing reauthorization.

“The Export-Import Bank gives politically-backed corporations billions in taxpayer-subsidized loans, distorting global markets and making us less competitive at home,” said John Kartch, spokesman for Americans for Tax Reform.

An article by The Economist’s editorial staff noted ideological changes within the Republican party.

With its three mainstays weakened, the party has rallied around a new set of ideas. At their core is the belief that no tax increase is ever acceptable. Grover Norquist of Americans for Tax Reform notes delightedly that, though not every congressional Republican has signed the pledge he promotes not to raise taxes, as a group they remain allergic to all such increases. 

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