Americans for Tax Reform sent a letter today to Hawaii legislators, urging them to oppose a series of proposed bills that would cause great harm to the Hawaiian economy and decrease access to life-saving reduced risk tobacco alternatives. Some of the most harmful proposals include bans on flavored vaping products that have been proven critical to helping smokers quit cigarette use, prohibitions on remote and online sales of vapor products that would recklessly abandon those in rural areas, and massive tax increases on vaping that would keep adults smoking – and dying from – traditional combustible cigarettes. The full letter can be read below. 
 

March 24, 2021 

To: Members of the Hawaii Legislature 
From: Americans for Tax Reform 

Dear Legislator,

On behalf of Americans for Tax Reform (ATR) and our supporters across Hawaii, I urge you to reject SB 1147, HB 598, HB 476, HB 1327, and HB 1328. Each of these bills would decrease access to lifesaving reduced risk tobacco alternatives like e-cigarettes and vapor products. If passed, these acts of legislation would lead to a clear increase in tobacco-related mortality in the state of Hawaii by forcing more adults to keep smoking – and dying from – dangerous traditional combustible cigarettes. 

About E-Cigarettes and Vapor Products: 

• Traditional combustible tobacco remains one of the leading preventable causes of death in Hawaii. The negative health effects of combustible tobacco come from the chemicals produced in the combustion process, not the nicotine. While highly addictive, nicotine is a relatively benign substance like caffeine and nicotine use “does not result in clinically significant short- or long-term harms”. 

• Nicotine replacement therapies such as nicotine patches and gums have helped smokers quit for decades. In recent years, advancements in technology have created a more effective alternative: vapor products and e-cigarettes. These products deliver nicotine through water vapor, mimicking the habitual nature of smoking while removing the deadly carcinogens that exist in traditional cigarettes.  

Benefits of E-Cigarettes and Vapor Products: 

• Vapor products have been proven to be 95% safer than combustible cigarettes and twice as effective at helping smokers quit than traditional nicotine replacement therapies. Vaping has been endorsed by over 30 of the world’s leading public health organizations as safer than smoking and an effective way to help smokers quit. 

• Just last week, a new analysis by Public Health England demonstrated just how effective vaping is in helping people quit smoking, noting that in just one year, over 50,000 British smokers, who would have continued smoking otherwise, quit smoking with vaping. 

• Studies have repeatedly shown that flavors, which would be prohibited under HB 1327 & HB 1328, are critical to helping adult smokers make the switch to vaping. Adults who use flavored vapor products are 43% more likely to quit smoking than an adult who uses un-flavored products, according to a recent study from ten of the world’s top experts in cancer prevention and public health.

• Evidence demonstrates that flavors also play no role in youth uptake of vaping. Academic studies have found that teenage non-smokers “willingness to try plain versus flavored varieties did not differ” and National Youth Tobacco Survey results have shown no increase in nicotine dependency among youths since flavored products entered the market. 

• A University of Glasgow study showed that e-cigarettes particularly help disadvantaged persons quit smoking. Another new study demonstrated that high-strength electronic nicotine products are particularly helpful for smokers with mental health issues quit smoking, like people with schizophrenia who smoke at rates more than three times the national average. Passing any of the aforementioned bills would fail to decrease inequalities in health and would widen further the socioeconomic disparities that disadvantaged communities face. 

• Vapor products would save over 28,000 lives if a majority of Hawaii smokers made the switch to vaping, extrapolating from a large-scale analysis performed by leading cancer researchers and coordinated by Georgetown University Medical Centre. 
   

SB 1147, HB 598, HB 476, and HB 1328 would each impose onerous taxes that would lead to disastrous impacts not only on Hawaii’s businesses, but public health as well. Taxing products proven to be significantly safer than traditional cigarettes at rates like those imposed on cigarettes would fail to incentivize smokers to make the lifesaving switch to vaping. Further, these taxes would drive them back towards deadly cigarettes, going against every principle of sound public policy. 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. 

We would also like to draw your attention to the fact that other aspects of SB 1147, such as the prohibition on online or remote sales, would significantly reduce access to persons in rural and remote areas of the state. Were these restrictions enacted, these persons, often in lower socioeconomic demographics and at the highest risk of smoking related mortality, would not have access to these reduced risk products, and would have no choice but to continue smoking combustible tobacco. 

HB 1328 and HB 1327 would ban the sale of flavored vaping products. While many proponents of flavor bans believe it would decrease youth use of nicotine products, real world evidence from San Francisco proves otherwise. San Francisco’s ban on flavored vaping products and e-cigarettes had no impact on usage among youths. To the contrary, after nearly a decade of steady decline in youth use of combustible cigarettes, there has been an increase in cigarette smoking among youths in San Francisco since the flavor ban was enacted.  

Flavors are also vital to adults seeking to quit smoking, as a recent study showed that it is 43% more likely for a cigarette smoker to quit when using a flavored product versus an unflavored or tobacco flavored product. A ban on flavored products would effectively outlaw sections of the Hawaiian economy, killing thousands of jobs and costing business owners their livelihoods at a time of great hardship due to the economic downturn brought on by the Covid-19 pandemic. 

For the reasons above, in the interests of public health and protecting the Hawaiian economy, we urge you to reject HB 1328, HB 1327, HB 476, HB 598, and SB 1147. Tens of thousands of lives quite literally depend on it. 

Sincerely, 

Tim Andrews 

Director of Consumer Issues 
Americans for Tax Reform 

"For generations, assets held at death get a stepped-up basis—to market value—when you die. Small businesses count on this."

But today a Washington Post reporter says Biden is "personally invested" in killing stepped up basis and imposing new tax

Joe Biden vows to target small businesses and individuals with a new Death Tax: He will eliminate step-up in basis. This will impose a steep tax increase and paperwork nightmare for small businesses, farms, and families. It may also violate his own pledge against raising any tax on any American making less than $400,000.

Washington Post reporter Jeff Stein tweeted Tuesday that "the president is personally invested in addressing the stepped-up basis issue".

In this video, you can see a sample of the many times Biden has threatened to eliminate step-up in basis.

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

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

Wood notes:

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

As reported previously by CNBC:

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

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

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

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

On top of all that, Biden also vows to impose capital gains tax increases just as America digs out from the pandemic. He said "every single solitary person" will pay capital gains taxes at ordinary income tax rates. He will also double the top rate to 40 percent, highest since Jimmy Carter in 1977.

Click below to see Biden's vow to eliminate stepped-up basis:

On this date 11 years ago, Biden broke his middle class tax pledge

As Vice President on this date 11 years ago -- March 23, 2010 -- Joe Biden broke his promise to the middle class that no one making less than $250,000 would see a single penny of their tax raised. Biden said his tax vow applied to "any tax."

Biden made the promise during a nationally televised Vice Presidential debate on Oct. 3, 2008 using firm language:

“No one making less than $250,000 under Barack Obama’s plan will see one single penny of their tax raised whether it’s their capital gains tax, their income tax, investment tax, any tax.” [Video]

Biden's running mate Barack Obama touted the pledge in speeches for months:

“I can make a firm pledge. Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.” [Transcript] [Video clip]

Once safely in office, Obama and Biden imposed tax increases on millions of middle class households.

White House spokesman Robert Gibbs was asked by reporters on Tax Day -- April 15, 2009 -- if the Obama-Biden pledge applied to Obamacare. Gibbs affirmed, saying: "The statement didn't come with caveats."

But Biden imposed tax increases on the middle class:

Individual Mandate Tax: Obamacare imposed a tax of $695 for an individual and $2,085 for a family of four for failing to buy “qualifying” health insurance as defined by Obama-Biden rules.

The tax hit low and middle-income families hard: Three-fourths of households stuck paying the tax made less than $50,000 per year, a blatant violation of Biden's pledge to the American people.

According to official IRS data for the 2017 tax year, 74% of households liable for the individual mandate tax had an adjusted gross income of less than $50,000.

In 2017, the individual mandate tax was paid by 4,606,271 households.

3,430,003 of these households had an adjusted gross income of less than $50,000.

Thanks to congressional Republicans and President Trump, this tax was zeroed out as part of the Tax Cuts and Jobs Act.

Biden is now pushing to reimpose the individual mandate tax.

Medicine Cabinet Tax: This Obama-Biden tax increase meant the 20 million Americans with a Health Savings Account and the 30 to 35 million Americans with a Flexible Spending Account were no longer able to purchase over-the-counter medicines using these pre-tax account funds. Examples include cold, cough, and flu medicine, menstrual cramp relief medication, allergy medicines, and dozens of other common medicine cabinet health items.

For years, this Obama-Biden tax made household medicine cabinet items more expensive. President Trump signed repeal of the Obamacare Medicine Cabinet Tax in March 2020.

Chronic Care Income Tax Hike: This Obama-Biden income tax increase directly targeted middle class Americans who faced high medical and dental expenses in a given year. The tax hit 10 million households per year.

Before Obamacare, Americans facing high medical expenses were allowed an income tax deduction to the extent that those expenses exceeded 7.5 percent of adjusted gross income (AGI). Obamacare imposed a threshold of 10 percent of AGI. Therefore, Biden not only made it more difficult to claim this deduction, he widened the net of taxable income.

Again, low and middle income households were hit hard by this Obama-Biden tax.

Thanks to President Trump and congressional Republicans, this tax hike was rolled back as part of the Tax Cuts and Jobs Act. But Biden has threatened many times to repeal the TCJA.

Flexible Spending Account Tax: Due to this Obama-Biden tax, the 35 million Americans who use a pre-tax Flexible Spending Account (FSA) at work to pay for their family’s basic medical needs face an Obama-Biden cap of $2,500.

Before Obamacare, the accounts were unlimited under federal law. But now, parents looking to save for medical costs or braces for the kids find themselves quickly hitting this new cap. This restricts options for low and middle income families.

This Obama-Biden tax also hits special needs families. Families with special needs children often use FSA dollars to pay for special needs tuition and educational materials, which can run thousands of dollars per year. The Obama-Biden $2,500 cap makes things more difficult for these families.

“Joe Biden lied to the American people when he said he would never raise any tax on any American earning less than $250,000. And now taxpayers know what to expect from his current $400,000 pledge,” said Grover Norquist, president of Americans for Tax Reform.

Obama and Biden first broke their "firm pledge" on Feb. 4, 2009 when Obama signed a 156 percent increase in the federal excise tax on tobacco, which raised the cost of a pack of cigarettes by 62 cents. The median income of a smoker at the time was less than $40,000.

When the Associated Press did a national story titled "Promises, Promises, Up in Smoke" calling out Obama and Biden for the broken pledge, then-White House spokesman Robert Gibbs made his colleague give the [bogus] reply to the reporter, Calvin Woodward. You see, according to the spokesman Reid Cherlin, the pledge only applied to "income or payroll taxes."

Busted. As noted by the AP:

An unequivocal "any tax" pledge also was heard in the vice presidential debate, another prominent forum.

"No one making less than $250,000 under Barack Obama's plan will see one single penny of their tax raised," Joe Biden said, "whether it's their capital gains tax, their income tax, investment tax, any tax."

The Democratic campaign used such statements to counter Republican assertions that Obama would raise taxes in a multitude of direct and indirect ways, recalled Kathleen Hall Jamieson, director of the Annenberg Public Policy Center at the University of Pennsylvania.

"I think a reasonable person would have concluded that Senator Obama had made a 'no new taxes' pledge to every couple or family making less than $250,000," she said.

Jamieson noted GOP ads that claimed Obama would raise taxes on electricity and home heating oil. "They rebutted both with the $250,000 claim," she said of the Obama campaign, "so they did extend the rebuttal beyond income and payroll."

Keep an eye on Biden as he attempts to come up with an excuse for breaking his $400,000 pledge.

In the Empire State, both the Assembly and Senate have introduced budgets that would impose nearly $7 billion in new taxes on businesses and individuals. Legislative leaders continue to push tax hikes even after The American Rescue Plan, and its blue state bailout, will send $100 billion in federal aid to the state of New York.

After the bill is signed into law, experts stress that tax hikes will no longer be needed. “The ARP, together with higher than expected income tax revenues, definitely closes the state and city budget gaps and makes tax increases this year or next unnecessary,” said Kathryn Wylde, CEO of the New York City Partnership to the New York Post. Even the office of Senator Chuck Schumer (D-NY) said earlier this month that federal pandemic relief would solve New York’s deficit and eliminate the need for new taxes. 

Tax hikes will make New York more unaffordable, and keep the exodus of high earners and business owners flowing out of the state. Hiking taxes during the pandemic, while the state is flush with bailout money, shows New Yorkers that Albany lawmakers will put their big spending priorities before jobs, families, and taxpayers in any circumstance.  It’s also a reminder to the out of state taxpayers footing the bill for New York’s negligence that the state will keep digging holes and demanding handouts well into the future.

The proposed new taxes include:

• A graduated tax hike on millionaires. The current income tax rate for single filers making more than $1 million and couples earning more than $2 million is 8.82 percent. That rate would rise to 11.85 percent.
• There also would be two new brackets: one for taxpayers earning between $5 million and $25 million and another for those making more than $25 million. The former would be taxed at a 10.85 percent rate, while the later would be slammed with 11.85 percent.
• A new capital gains tax of 1 percent on those earning more than $1 million a year, boosting state coffers by about $700 million.
• A new progressive state tax on those with pied-a-terre’s, mansion town homes — or anything in between — used as a second home in New York City. The new levy would raise a projected $300 million for the state.
• An estate tax boost from 16 percent to 20 percent, raking in another $130 million.
• A new 18 percent “surcharge” on corporate franchises, utilities and insurance companies — which could mean higher bills for customers. That tax would generate $1 billion, the lawmakers said.
• The reinstatement of a minimum business tax on corporate capital, earning another $150 million for the state.
• A recording tax on “mezzanine debt and preferred equity investments,’’ which would add another $171 million to state coffers.

“These proposals would raise New York’s top state income tax rate to its highest statutory levels since 1979, when it was 12 percent,’’ said EJ McMahon, fiscal analyst at the watchdog Empire Center for Public Policy. At a time when New York desperately needs to retain investment for a healthy recovery, the approach by Democrats to tax everything from Wall Street to small businesses seems quite foolish.