How the Tax Cuts & Jobs Act is Helping West Virginia
West Virginia is benefiting greatly from the Tax Cuts and Jobs Act enacted by congressional Republicans and President Donald Trump:
116,480 West Virginia households are benefiting from the TCJA’s doubling of the child tax credit.
Every income group in every West Virginia congressional district received a tax cut. Nationwide, a typical family of four received a $2,000 annual tax cut and a single parent with one child received a $1,300 annual tax cut.
633,120 West Virginia households are benefiting from the TCJA’s doubling of the standard deduction. Thanks to the tax cuts, nine out of ten households take the standard deduction which provides tax relief and simplifies the tax filing process.
22,820 West Virginia households are benefiting from the TCJA’s elimination of the Obamacare individual mandate tax. Most households hit with this tax made less than $50,000 per year.
Lower utility bills: As a direct result of the TCJA’s corporate tax rate cut, West Virginia residents are saving money on utility bills. Lower electric, water, and gas bills help households and small businesses operating on tight margins. For example, at least three West Virginia utilities reduced their customers' bills (see below).
Thanks to the tax cuts, West Virginia businesses of all sizes are hiring, expanding, raising pay and increasing employee benefits:
Eagle Manufacturing (Wellsburg, West Virginia) – Creating new jobs and purchasing new equipment:
The company traditionally has sought to buy used equipment at low prices when replacement of machinery was necessary, according to Trimmer.
“Because of that tax break, we can invest and buy our next machines,” he said. “My department is now looking to buy a $2 million machine, rather than a 1990 classic. It will pay for itself in a short manner of time.”
Trimmer said the company is about to sign some government contracts that will put Eagle cabinets and metal products on the next generation of U.S. naval destroyers.
This could result in as many as 25 jobs being created, he said. – May 3, 2018, The Intelligencer article excerpt
Doss Enterprises (Jane Lew, West Virginia) – Hiring new employees and purchasing new equipment:
The benefits of the Tax Cuts and Jobs Act are evident just from looking around the Doss facility, Capito said.
“When I saw their board of (new) hires, there must have been 20 or 30 names on there, just April and May,” she said.
The company has chosen to reinvest its tax savings in its employees and into new equipment, Capito said.
“All of the employees are seeing (it) in their paychecks,” she said. “(Doss) has also bought some new equipment with his money, which is a great investment. He’s going to be hiring at least another 30 people.” – May 2, 2018, WVNews.com article excerpt
Warwood Tool (Wheeling, West Virginia) – Creating a new line of products:
The tax cuts have given the company and its customers enough optimism for the future that Warwood Tool is developing a new line of products. – May 3, 2018, The Intelligencer article excerpt
Panhandle Cleaning and Restoration (Wheeling, West Virginia) – Purchasing new trucks and equipment:
While Panhandle is often called upon for clean-up services after national disasters, Contraguerro told Jenkins the company relies on its day-to-day operations. Their employees, trucks and equipment are called to local homes and businesses each day following water-line breaks or other incidents, and Panhandle doesn’t wait for hurricanes to hit, he said.
The company plans to invest the money it receives from the tax cuts into more trucks and equipment.
“We will be reinvesting in the business,” he told Jenkins. “There is a huge benefit to reinvesting.” -- May 3, 2018, The Intelligencer article excerpt
Davis Trust Company (Elkins, West Virginia) - 3% across the board pay raises (on top of existing compensation structure.)
West Virginia American Water (Charleston, West Virginia) – The utility will pass tax savings on to customers:
West Virginia American Water Company announced a settlement plan last week which — if approved by the PSC — would result in an average savings of $3.77 a month for water and sewer customers in the state.
“The recent federal tax reform will save our customers an estimated $4.6 million annually, so we are passing these savings on to our customers beginning next month,” Brian Bruce, president of West Virginia American Water. - August 21, 2018 Bluefield Daily Telegraph excerpt
Potomac Edison (Martinsburg, West Virginia) - The utility is passing on tax savings to customers:
‘More than 85,000 Potomac Edison customers in the Eastern Panhandle should see lower bills in the coming weeks thanks to federal tax reforms adopted in December.
The West Virginia Public Service Commission announced Friday that it approved rate reduction settlements for utility companies totaling almost $85 million annually, starting next month. - August 24, 2018, Herald Mail Media
Appalachian Power Co. (Milton, West Virginia) – the utility will pass along tax reform savings to customers.
Appalachian Power Company saved $235 million dollars from the federal tax cuts and the company is proposing passing the money back to its customers in a variety of ways.
The multi-pronged proposal is in a filing with the state Public Service Commission due Wednesday. The PSC is requiring all utilities to tell it their tax cut savings and what they plan to do with it.
West Virginia Consumer Advocate Jackie Roberts told MetroNews the money clearly belongs to the customers.
“They (the utilities) had taxes in their rates and now the taxes in their rates have significantly decreased—so they shouldn’t be able to keep collecting and keeping those higher taxes in their rates,” Roberts said.
Appalachian Power Company Communications Director Jeri Matheney agrees–the $235 million Appalachian Power will save belongs to its customers.
“It is customer money. What we propose to do is provide a method to keep rates as stable as possible over the longterm and as much as possible eliminate the need for rate increases,” Matheney said.
The Appalachian Power distribution proposal for West Virginia customers includes:
–$131 million to completely offset the company’s fuel and vegetation control program funding request that was part of an April filing with the PSC
–$19 million reduction in the company’s base rate case filed earlier this month (taking the $115 million request down to $96 million)
–$51 million to reduce next year’s fuel recovery cost rate case
–$1 million for a pilot economic development grant program
–$30.1 million to return to customers over the next three years – May 30, 2018, MetroNews article excerpt
U-Haul (81 locations in West Virginia) – $1,200 bonuses for full-time employees, $500 for part-time employees.
Citizens Bank of West Virginia (Elkins, West Virginia) -- $1,000 bonuses for all 66 employees:
Citizens Bank of West Virginia issued a bonus of $1,000 to each of their 66 employees, joining a number of U.S. companies to pass along savings from the federal tax reform to its staff. The announcement was made in a surprise staff meeting by the bank’s president & chief executive officer.
“One of the best investments we can make is in our employees who are dedicated to making sure our customers have great banking experiences at Citizens,” said President & CEO Nathaniel S. Bonnell. “This $66,000 investment demonstrates our thanks and appreciation to our team for their tireless efforts and commitment to the bank.”
The bank’s board of directors said it was an easy decision to reward the dedicated and hard-working employees of Citizens Bank. “There are several ways we will put the tax savings to work for Citizens,” stated Board Chairman Max L. Armentrout. “However, we are most excited about paying this bonus to the great employees we have working at our bank, serving our customers and shareholders.”
Employee reaction was overwhelming as they were excited to have $1000 checks arrive the same day as the announcement.
“This was totally unexpected!” said Assistant Trust Officer Crystal Kimbleton as she choked back tears. “This check will definitely help with upcoming high school graduation and college expenses.”
“It’s the best day ever!” exclaimed Alec Rader, Deposit Operations Administrative Assistant. “One thousand dollars, a pizza luncheon – this is not how I was expecting this day to go; what a great surprise!”
Head Teller Amanda Riffle stated she was totally speechless and shocked. “This money is going to go a long way in helping me pay down my college loan. It’s greatly appreciated!”
“I’m so grateful and it’s so amazing!” stated teary-eyed Mortgage Loan Processor Anita Jones. “I am going home to Indonesia this summer and this money will help tremendously with the cost of that trip!” Anita has not been home in nine years.
Lisa Plum, Deposit Operations Administrative Assistant II, says the employees of Citizens couldn’t ask to work for a better organization. “This was just wonderful news. I’m now going to be able to take a vacation this year that was not going to happen. We are so fortunate to work for a bank that cares so much for their employees.”
The overall sentiment of the employees throughout the bank was shock and gratitude. – Feb. 2018 Citizens Bank of West Virginia statement
Walmart – West Virginians employed at 43 Walmart stores received tax reform bonuses, wage increases, and expanded maternity and parental leave. Walmart employees who adopt children will be given $5,000 to help cover expenses.
AT&T -- $1,000 bonuses to 880 West Virginia employees; Nationwide, $1 billion increase in capital expenditures:
Today, Congress approved legislation representing the first comprehensive tax reform in a generation. The President is expected to sign the bill in the coming days.
Once tax reform is signed into law, AT&T* plans to invest an additional $1 billion in the United States in 2018 and pay a special $1,000 bonus to more than 200,000 AT&T U.S. employees — all union-represented, non-management and front-line managers. If the President signs the bill before Christmas, employees will receive the bonus over the holidays.
“Congress, working closely with the President, took a monumental step to bring taxes paid by U.S. businesses in line with the rest of the industrialized world,” said Randall Stephenson, AT&T chairman and CEO. “This tax reform will drive economic growth and create good-paying jobs. In fact, we will increase our U.S. investment and pay a special bonus to our U.S. employees.”
Since 2012, AT&T has invested more in the United States than any other public company. Every $1 billion in capital invested in the telecom industry creates about 7,000 jobs for American workers, research shows. -- Dec. 20, 2017 AT&T Inc. press release
Home Depot - Six locations in West Virginia, bonuses for all hourly employees, up to $1,000.
Lowe's -- 2,000 employees at 18 stores in West Virginia. Employees will receive bonuses of up to $1,000 based on length of service; expanded benefits and maternity/paternal leave; $5,000 of adoption assistance.
Ryder (Three locations in West Virginia) -- Tax reform bonuses for employees.
Starbucks Coffee Company (25 locations in West Virginia) – $500 stock grants for all retail employees, $2,000 stock grants for store managers, and varying plan and support center employee stock grants. Nationally, 8,000 new retail jobs; an additional wage increase this year, totaling approximately $120 million in wage increases, increased sick time benefits and parental leave.
T.J. Maxx – Four stores in West Virginia – Tax reform bonuses, retirement plan contributions, parental leave, enhanced vacation benefits, and increased charitable donations:
The 2017 Tax Act benefited the Company in the fourth quarter and full year Fiscal 2018. The Company expects to continue to benefit from the 2017 Tax Act going forward, primarily due to the lower U.S. corporate income tax rate. As a result of the estimated cash benefit related to the 2017 Tax Act, the Company is taking the following actions:
Associates
- A one-time, discretionary bonus to eligible, non-bonus-plan Associates, globally
- An incremental contribution to the Company’s defined contribution retirement plans for eligible Associates in the U.S. and internationally
- Instituting paid parental leave for eligible Associates in the U.S.
- Enhancing vacation benefits for certain U.S. Associates
Communities
Made meaningful contributions to TJX’s charitable foundations around the world to further support TJX’s charitable giving – Feb. 28, 2018 The TJX Companies Inc. press release excerpt
Cintas (Multiple locations in West Virginia) -- $1,000 bonuses for employees of at least a year, $500 for employees of less than a year.
Chipotle Mexican Grill (Multiple locations in West Virginia) - Bonuses ranging from $250 to $1,000; increased employee benefits; nationally, $50 million investment in existing restaurants.
Comcast (Multiple locations in West Virginia) -- $1,000 bonuses; nationally, at least $50 billion investment in infrastructure in next five years.
FedEx (Multiple locations in West Virginia) – Accelerated and increased compensation; pension plan contributions:
“FedEx Corporation is announcing three major programs today following the recently enacted U.S. Tax Cuts and Jobs Act:
- Over $200 million in increased compensation, about two-thirds of which will go to hourly team members by advancing 2018 annual pay increases by six months to April 1st from the normal October date. The remainder will fund increases in performance- based incentive plans for salaried personnel.
- A voluntary contribution of $1.5 billion to the FedEx pension plan to ensure it remains one of the best funded retirement programs in the country.
- Investing $1.5 billion to significantly expand the FedEx Express Indianapolis hub over the next seven years. The Memphis SuperHub will also be modernized and enlarged in a major program the details of which will be announced later this spring.
FedEx believes the Tax Cuts and Jobs Act will likely increase GDP and investment in the United States. – Jan. 26 2018, FedEx press release
McDonald’s (101 locations in West Virginia) – Increased tuition investments which will provide educational program access for 400,000 U.S. employees. $2,500 per year (up from $700) for crew working 15 hours a week, $3,000 (up from $1,050) for managers, and more:
McDonald’s Corporation today announced it will allocate $150 million over five years to its global Archways to Opportunity education program. This investment will provide almost 400,000 U.S. restaurant employees with accessibility to the program as the company will also lower eligibility requirements from nine months to 90 days of employment and drop weekly shift minimums from 20 hours to 15 hours. Additionally, McDonald’s will also extend some education benefits to restaurant employees’ family members. These enhancements underscore McDonald’s and its independent franchisees’ commitment to providing jobs that fit around the lives of restaurant employees so they may pursue their education and career ambitions.
The Archways to Opportunity program provides eligible U.S. employees an opportunity to earn a high school diploma, receive upfront college tuition assistance, access free education advising services and learn English as a second language.
“Our commitment to education reinforces our ongoing support of the people who play a crucial role in our journey to build a better McDonald’s,” said Steve Easterbrook, McDonald’s President and CEO. “By offering restaurant employees more opportunities to further their education and pursue their career aspirations, we are helping them find their full potential, whether that’s at McDonald’s or elsewhere.”
Accelerated by changes in the U.S. tax law, McDonald’s increased investment in the Archways to Opportunity Program includes:
- Increased Tuition Investment:
- Crew: Eligible crew will have access to $2,500/year, up from $700/year.
- Managers: Eligible Managers will have access to $3,000/year, up from $1,050.
- Participants have a choice for how they apply this funding – whether it be to a community college, four year university or trade school. There is no lifetime cap on tuition assistance – restaurant employees will be able to pursue their education and career passions at their own pace. The new tuition assistance is effective May 1, 2018 and retroactive to January 1, 2018.
- Lowered Eligibility Requirements: Increase access to the program by lowering eligibility requirements from nine months to 90 days of employment. In addition, dropping from 20 hours minimum to 15 hours minimum (roughly two full time shifts) per week to enable restaurant employees more time to focus on studies.
- Extended Services to Families: Extension of Career Online High School and College Advisory services to restaurant employees’ family members through existing educational partners Cengage and Council for Adult and Experiential Learning (CAEL).
- Additional Resources: Career exploration resources for eligible restaurant employees to be available later this year.
- Creation of an International Education Fund: Grants to provide local initiatives and incentives in global markets to further education advancement programs.
“Since its inception, Archways to Opportunity was meant to match the ambition and drive of restaurant crew with the means and network to help them find success on their own terms,” said David Fairhurst, McDonald’s Chief People Officer. “By tripling tuition assistance, adding education benefits for family members and lowering eligibility requirements to the equivalent of a summer job, we are sending a signal that if you come work at your local McDonald’s, we’ll invest in your future.”
After launching in the U.S. in 2015, Archways to Opportunity has increased access to education for over 24,000 people and awarded over $21 million in high school and college tuition assistance. Graduates have received college degrees in Business Administration, Human Resources, Communications, Accounting, Microbiology and more. – March 29, 2018 McDonald’s Corporation press release excerpt
Note: If you know of other West Virginia examples, please email John Kartch at jkartch@atr.org
The running nationwide list of companies can be found at www.atr.org/list
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ATR Op-Ed in The Hill: The CFPB's data overreach hurts the businesses it claims to help
In an op-ed published in The Hill last week, ATR Federal Affairs Manager Bryan Bashur wrote about a rulemaking issued by the Consumer Financial Protection Bureau (CFPB), which would significantly increase data collection and reporting requirements for financial institutions.
Section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act required the CFPB to issue a rulemaking that would compel financial institutions to collect personal data from small businesses that submit loan applications and report it to the federal government.
If finalized in its current form, the CFPB’s rule would mandate the collection of a laundry list of personal information from small businesses. As Bashur highlights:
The CFPB wants to make business decisions for banks, credit unions and financial technology companies. Section 1071 directs financial institutions to collect data on small businesses that apply for a loan. Specifically, the financial institutions must disclose data to the CFPB, such as the sex, race and ethnicity of the loan applicant, the amount of the credit transaction, the gross annual revenue of the business and the census tract in which the business is located.
Ostensibly, this information would be used to target lending discrimination toward minority-owned and women-owned small businesses. While this is an admirable goal, the proposal falls short. As Bashur points out:
The CFPB will likely use the data it collects as a precursor to issuing future regulations that will force financial institutions to only lend to certain small businesses without considering risk factors. If financial institutions are unable to take risks into account when deciding whether to extend credit, they will likely decide to withhold all credit.
The CFPB’s rule will not enable increased credit access to minority-owned and women-owned small businesses. Instead, capital will dry up and no credit will make its way to traditionally under-capitalized businesses. In 2017, the Treasury Department published a report on financial regulation in the United States and recommended repealing section 1071 outright.
The rule will exacerbate the issue that it is trying to solve.
The federal government should promote deregulation to help unleash capital for small businesses. Unfortunately, this CFPB proposal will only increase government intervention into private business activities between lenders and borrowers. As Bashur explains:
Ensuring all small businesses have access to capital is vital for the sustainment of a strong American economy. However, it is wrong to assume that the federal government will know what financing decisions should be made between a private lender and a private borrower. The CFPB should let financial institutions do their job and continue to make risk-based financing decisions. This both allows capital to flow to businesses with successful businesses models and ensures that credit can continue to flow.
COVID-19 has been detrimental for small businesses. The last thing small businesses need is for the CFPB to intervene in private contracts that are distortive and may end up promoting discrimination instead of ending it.
Click here to read the full op-ed.
Photo Credit: "Exterior of the Consumer Financial Protection Bureau, Washington, DC USA" by Ted Eytan is licensed under CC BY-SA 2.0
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Tennessee Companies Will Face Higher Taxes Than China and Europe if Dem Bill Passes
Tennessee companies will get stuck with higher taxes than communist China if the Democrats' reconciliation bill is enacted.
The Democrats' reconciliation bill will saddle Tennessee with a combined federal-state corporate tax rate of 31.3% vs. communist China's 25%.
The bill will also put Tennessee companies at a competitive disadvantage vs. Europe: The European average corporate tax rate is 19%.
Tennessee is home to 10 Fortune 500 companies.
"As the country tries to recover from a once-in-a-century pandemic, Tennessee's congressional Democrats must explain why they want to stick residents with higher taxes than China and Europe," said Grover Norquist, president of Americans for Tax Reform.
The Democrats' $3.5 trillion bill will impose the largest tax increase since 1968. It will raise individual income taxes, small business taxes, corporate taxes, and capital gains taxes. If passed, the U.S. capital gains tax rate would be 31.8% vs. China's 20%.
The burden of the corporate tax rate hike will be borne by workers in the form of lower wages, and by households in the form of higher prices. Higher corporate tax rates will also raise utility bills.
The non-partisan Joint Committee on Taxation recently affirmed in congressional testimony that the corporate tax rate hike will fall on "labor, laborers."
Testifying before the House Ways & Means Committee, JCT Chief of Staff Thomas A. Barthold said:
"Literature suggests that 25% of the burden of the corporate tax may be borne by labor in terms of diminished wage growth."
Economists across the political spectrum agree that workers bear the brunt of corporate tax increases. And 25% is on the very low end.
According to the Stephen Entin of the Tax Foundation, labor (or workers) bear an estimated 70 percent of the corporate income tax. He wrote in 2017:
"Over the last few decades, economists have used empirical studies to estimate the degree to which the corporate tax falls on labor and capital, in part by noting an inverse correlation between corporate taxes and wages and employment. These studies appear to show that labor bears between 50 percent and 100 percent of the burden of the corporate income tax, with 70 percent or higher the most likely outcome."
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:
"We identify this direct shifting through cross-company variation in tax liabilities, conditional on value added per employee. Our central estimate is that $1 of additional tax reduces wages by 92 cents in the long run. The incidence of a $1 fall in value added is smaller, consistent with our wage bargaining model."
A 2015 study by Kevin Hassett and Aparna Mathur found that a 1 percent increase in corporate tax rates leads to a 0.5 percent decrease in wage rates. The study analyses 66 countries over 25 years and concludes that workers could see a greater reduction in wages than the federal government raises in new revenue from a corporate income tax increase:
"We find, controlling for other macroeconomic variables, that wages are significantly responsive to corporate taxation. Higher corporate tax rates depress wages. Using spatial modelling techniques, we also find that tax characteristics of neighbouring countries, whether geographic or economic, have a significant effect on domestic wages."
A 2006 study by William Randolph of the Congressional Budget Office found that 74% of the corporate tax is borne by domestic labor:
"Burdens are measured in a numerical example by substituting factor shares and output shares that are reasonable for the U.S. economy. Given those values, domestic labor bears slightly more than 70 percent of the burden of the corporate income tax."
A 2007 study by Alison Felix estimated that a 1 percentage point increase in the marginal corporate tax rate decreases annual wages by 0.7 percent. She concluded that the wage reductions are over four times the amount of collected corporate tax revenue:
"The empirical results presented here suggest that the incidence of corporate taxation is more than fully borne by labor. I estimate that a one percentage point increase in the marginal corporate tax rate decreases annual wages by 0.7 percent. The magnitude of the results predicts that the decrease in wages is more than four times the amount of the corporate tax revenue collected."
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:
"Because capital is mobile, high tax rates divert investment away from the U.S. corporate sector and toward housing, noncorporate business sectors, and foreign countries. American workers need that capital to become more productive. When it’s invested elsewhere, real wages decline, and if product prices are set globally, there is no place for the corporate tax to land but straight on the back of the least-mobile factor in this setting: the American worker."
Even the left-of-center Tax Policy Center estimates that 20 percent of the burden of the corporate income tax is borne by labor:
"In calculating distributional effects, the Urban-Brookings Tax Policy Center (TPC) assumes investment returns (dividends, interest, capital gains, etc.) bear 80 percent of the burden, with wages and other labor income carrying the remaining 20 percent."
"Democrats would be wise to oppose any tax increase," said Norquist.
Lawmakers Should Support the Prohibiting IRS Financial Surveillance Act
Last week, Senator Tim Scott (R-S.C.), with Senate Finance Committee Ranking Member Mike Crapo (R-Idaho) and Senate Banking Committee Ranking Member Pat Toomey (R-Penn.), introduced the “Prohibiting IRS Financial Surveillance Act,” which would bar the IRS from implementing Democrats’ proposed reporting regime on the bank, loan, and investment accounts used by virtually every American. There is also a House companion bill introduced by Rep. Drew Ferguson (R-Ga.).
Democrats’ reporting regime would force financial institutions to collect any personal or business account in which the total withdrawals and deposits exceed at least $10,000 throughout the year. The Joint Committee on Taxation (JCT) estimates that taxpayers in every single income bracket would be impacted by this reporting requirement. This is a radical violation of privacy, will subject virtually every American to IRS abuse, and is not consistent with Democrats’ goals of making the “rich pay their fair share.”
Sen. Scott’s bill explicitly prohibits the disclosure of any account’s outflows and inflows:
“The Secretary of the Treasury (including any delegate of the Secretary) may not require any financial institution to report –
(1) the inflows or outflows of any account maintained by such institution, or
(2) any balances, transactions, transfers, or similar information with respect to any such account…”
The proposed reporting regime is a radical violation of privacy. This policy would give the federal government access to virtually every American’s account inflows and outflows. The proposal is not tailored nor targeted at all towards higher-income taxpayers or more “suspicious” behavior. Steven Rosenthal with the left-leaning Tax Policy Center explained that this reporting regime proposal would "bury the agency in a sea of unproductive information.” In fact, if a family's monthly expenses total just $833 a month, or about $200 a week, their bank information would be reported to the IRS.
Additionally, the IRS already abuses current reporting laws. The IRS Criminal Investigation Division (IRS-CI) regularly violated taxpayers’ rights and skirted or ignored due process requirements when investigating taxpayers for allegedly violating the existing $10,000 currency transaction reporting requirements, according to a 2017 report by the Treasury Inspector General for Tax Administration (TIGTA).
The report found numerous abuses – IRS agents often failed to properly identify themselves, seized financial assets before ever having talked or consulted with investigated taxpayers, didn’t attempt to verify reasonable explanations investigated taxpayers offered, and did not inform taxpayers of important information nor the purpose of interviews. The outcome of these cases was often determined by how willing a taxpayer was to engage in litigation against the government, rather than how severe the alleged offense was, a clear violation of the Eighth Amendment. To make matters worse, the vast majority of taxpayers targeted were innocent.
Finally, one must wonder: “Why would Democrats be pushing for this policy if their stated goal is to make millionaires and billionaires pay their fair share?” Evidently, even Democrats know that the IRS will need tools to use against the middle class in order to raise the amount of money they claim the IRS will raise through increased funding.
Cosponsors of the "Prohibiting IRS Financial Surveillance Act" include Senators Mitch McConnell (R-Ky.), John Thune (R-S.D.), John Barrasso (R-Wyo.), Joni Ernst (R-Iowa), Roy Blunt (R-Mo.), John Cornyn (R-Texas), Roger Marshall (R-Kan.), Thom Tillis (R-N.C.), Cynthia Lummis (R-Wyo.), Steve Daines (R-Mont.), John Kennedy (R-La.), Jerry Moran (R-Kan.), Kevin Cramer (R-N.D.), Richard Shelby (R-Ala.), Mike Rounds (R-S.D.), Chuck Grassley (R-Iowa), Richard Burr (R-N.C.), Todd Young (R-Ind.), John Hoeven (R-N.D.), Cindy Hyde-Smith (R-Miss.), Roger Wicker (R-Miss.), Marsha Blackburn (R-Tenn.), Jim Risch (R-Idaho), Mike Braun (R-Ind.), Shelley Moore Capito (R-W.Va.), Ben Sasse (R-Neb.), Tom Cotton (R-Ark.), Mitt Romney (R-Utah), James Lankford (R-Okla.), Jim Inhofe (R-Okla.), Dan Sullivan (R-Alaska), Josh Hawley (R-Mo.), Marco Rubio (R-Fla.), Rick Scott (R-Fla.), Ted Cruz (R-Texas), Bill Hagerty (R-Tenn.), Tommy Tuberville (R-Ala.), Lindsey Graham (R-S.C.), Ron Johnson (R-Wis.), Rand Paul (R-Ky.), John Boozman (R-Ark.), Mike Lee (R-Utah), Susan Collins (R-Maine), Deb Fischer (R-Neb.), and Rob Portman (R-Ohio).
The IRS has a long record of targeting and harassing taxpayers. This proposed new financial reporting regime is a violation of privacy, would provide another way for the agency to target taxpayers, and would disproportionately harm low- and middle-income Americans. To protect taxpayers, all lawmakers should support the “Prohibiting IRS Financial Surveillance Act.”
Photo Credit: "Tim Scott" by Gage Skidmore is licensed under CC BY-SA 2.0.
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Americans Oppose Taxing Unrealized Gains by an Overwhelming 3-to-1 Margin
Democrats are gearing up to impose a tax on unrealized capital gains. This "mark to market" regime would force Americans to pay taxes every year on the paper gain in value of assets -- stocks, collectibles, tchotchkes, etc. But Americans oppose taxing unrealized gains, by a ratio of 3-1.
Across all demographic groups, Americans strongly oppose taxing unrealized gains, according to a survey experiment with 5,000 respondents published in May 2021.
The paper, The Psychology of Taxing Capital Income: Evidence from a Survey Experiment on the Realization Rule, is authored by Professor Zachary D. Liscow of Yale University Law School and Edward G. Fox of the University of Michigan Law School.
The researchers found:
"Respondents strongly prefer to wait to tax gains on publicly-traded stocks until sale versus taxing unsold gains each year: 75% to 25%. Though this opposition is strongest among those who are wealthier or own stocks, all demographic groups oppose taxing unsold gains by large margins. This opposition persists and is often strengthened when looking across a variety of other assets and policy framings."
The realization rule requires that property must be sold before gains are taxed. By a margin of 75 to 25, people preferred this rule.
The study also noted popular revolts against the property tax as evidence of the aversion to taxing unsold gains.
They asked participants about how a property tax should handle appreciated assets, noting that:
“In this context, respondents are again hesitant to fully tax gains on assets that have not been sold.”
Survey-takers’ massive rejection of abandoning the realization rule held up even after they heard arguments in favor of this kind of taxation, when they themselves don’t own stock, and even if they’re Democrats.
A primary reason for this is because people use “mental accounting” heuristics, under which they react differently to unsold gains than other ways of getting richer, like wages:
"... These behaviors are often thought to result from people using heuristics that put stocks in different “mental accounts” than money in the bank or wages. Using these heuristics, most people treat stock investments as an “open” mental account until sale and do not fully internalize paper gains or losses."
After all, taxes paid on these assets would have to come from other sources of income, not the asset itself.
The study explains this sentiment further:
"There is significant concern that unsold gains are not yet real in a sense. As shown in Table 4, the word most distinctively associated with opponents is “actual”—as in, taxpayers have not “actually” received income “yet.” Likewise, they note that the stock has not yet yielded “cash,” or anything in the taxpayer’s “hand.”"
Abandoning the realization rule is so unpopular that, even when told that this hypothetical tax would only impact those with over $10 million in wealth, the preference for taxing unsold stock gains only moderately increased by 9 percentage points to 34 percent.
Many on the left including the progressive group ProPublica are suggesting that unrealized gains should be taxed annually.
Senate Finance Committee Chair Ron Wyden (D-Ore.) has long tried to impose a tax on unrealized gains, an initiative he calls, “Treat Wealth like Wages.”
But as shown by the study, taxing unrealized gains cuts deeply against Americans’ sense of fairness and common sense.
Photo Credit: Stock Catalog
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Partisan FTC and DOJ Misconstrue Debit Card Landscape
Partisanship and left-wing extremism epitomize the Biden administration. This has made it exceedingly difficult for the administration to finalize a deal with moderate Democrats on the multi trillion-dollar tax-and-spend package. What is important to note though is that this partisanship extends beyond the doors of the White House and is present at every agency throughout the federal government.
In particular, the Department of Justice (DOJ) and Federal Trade Commission (FTC) are led by liberals Merrick Garland and Lina Khan, respectively. Recently DOJ and FTC filed letters in support of the Federal Reserve’s notice of proposed rulemaking, which would amend provisions of Regulation II so that certain debit card routing restrictions would apply to transactions that occur online (i.e. card-not-present transactions).
The fact that these agencies publicly support the Federal Reserve’s rulemaking to further bolster the routing restrictions from the Durbin amendment, which is widely lauded by Democrats, is par for the course.
If officials at DOJ and FTC were nominated by a conservative Republican administration, it is unlikely they would support policy that is clearly an expansion of a federal government mandate.
Moreover, the language on routing restrictions in the Durbin amendment has been misconstrued by the Federal Reserve. The language in statute requires the Federal Reserve to issue rules that prohibit restricting “the number of payment card networks on which an electronic debit transaction may be processed.” However, statute does not authorize the Federal Reserve to write rules “to impose an affirmative obligation” on banks and credit unions to make sure that each merchant and transaction is provided with at least two unaffiliated payment networks. Clearly, the Federal Reserve is overstepping its statutory authority in its proposed rulemaking.
The DOJ and FTC’s claims that banks, credit unions, and payment card networks are actively conducting anticompetitive behavior to the detriment of merchants is false. In many cases merchants are the ones limiting routing options. Banks and credit unions cannot help it if merchants refuse to use updated and more secure technology to access payment networks.
In 2011, the Federal Reserve admitted that banks and credit unions could not be at fault if a merchant decided to not install new card processing technology, such as card reader terminals. The Federal Reserve stated that, “To the extent a merchant has chosen not to accept PIN debit, the merchant, and not the issuer or the payment card network, has restricted the available choices for routing an electronic debit transaction.”
This issue continues today. Merchants have limited payment options for consumers to cut corners while the technology for alternative payment methods for card-not-present transactions has existed for years.
Merchants “have been making a conscious decision not to adopt technologies” that would broaden payment transaction choices for card-not-present transactions.
Biden’s DOJ and FTC have it all wrong. It is not the banks, credit unions, or payment card networks that reduce competition, it is the large multi-billion-dollar merchants that prefer to cut corners than prioritize secure and efficient debit transactions.
Photo Credit: "Woman holding credit card closeup" by Nenad Stojkovic is licensed under CC BY 2.0
More from Americans for Tax Reform
Tax Policy Center: Biden's IRS Bank Account Snooping Plan "Will Fail"
America's top progressive tax group says Dem plan will "bury the agency in a sea of unproductive information" and "won't help" and "will fail"
Not only are Americans creeped out by President Biden's plan to have the IRS snoop on their bank accounts, the nation's most prominent progressive tax policy group says the plan won't even work.
The Tax Policy Center says the plan is "poorly conceived," and will "bury the agency in a sea of unproductive information" and "won't help" and "will fail."
On Oct. 19 Tax Policy Center senior fellow Steve Rosenthal wrote on Twitter:
"Biden's Treasury doubles-down on a poorly-conceived reporting proposal, casting its net far too wide, which may catch small businesses, but not the big fish (who cheat by stretching the tax law, not by hiding their cash flow). I tried to help at the start, but I gave up."
On Oct. 20 Rosenthal wrote on Twitter:
"If Congress wants to collect more money from the rich, it must pass better tax rules, which measure and time income accurately and do not create ambiguities that aggressive taxpayers and their highly-paid advisers can exploit. Bank reports on aggregate cash flows won't help."
On Oct. 16 Rosenthal was quoted in The Hill:
Steve Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center, whose former director now works in the Biden administration, said the proposal is too expansive and thinks bank lobbyists “have touched a raw nerve” with their customers who are concerned about privacy.
“I think at the end of the day, this bank proposal will fail,” he said.
On May 3, Rosenthal wrote:
"In practice, the IRS’ task would be daunting and, in fact, bury the agency in a sea of unproductive information.
Biden’s plan is expansive: deposits and withdrawals must be reported for every account, individual or business, at every financial institution. Then, to construct taxpayer-specific information, the IRS must collate taxpayer-account information across many different financial institutions. That is because taxpayers often hold multiple accounts. Yet, whether collated or not, deposits and withdrawals are not income, unlike wages or interest. And deposits and withdrawals cannot be netted to calculate income, without substantial adjustments."
On Oct. 18 Rosenthal was quoted in The Washington Post:
"It’s still a deeply flawed proposal,” Rosenthal said. “Even at $10,000, the Biden bank proposal is still too sweeping, throws a net very wide, and it’s hard to see what fish they want to catch here.”
Biden wants to increase IRS funding by $80 billion to double the size of the IRS and hire 87,000 new auditors and agents. This quantity of agents is so large that it could fill every seat in Washington DC's Nationals Park, twice. It could fill the ancient Colosseum 1.74 times. 87,000 new IRS agents is more than the entire personnel on all 11 U.S. aircraft carriers.
Even Obama-era IRS chief John Koskinen – a longtime advocate of increasing the IRS budget – thinks Biden’s proposal is too much.
As reported by the New York Times:
“I’m not sure you’d be able to efficiently use that much money,” Mr. Koskinen said in an interview. “That’s a lot of money.”
Rather than fix the agency's longstanding mismanagement, ineptitude and abuse problems, Biden's approach will make the problem worse.
Americans have a firm, categorical objection to the IRS snooping in their bank accounts.
Here are some quotations from a local news compilation released by Americans for Tax Reform this week:
“I don’t see what business it is of anyone’s what I spend out of my bank account."
“No, it’s not their business. I already tell them enough.”
“I don’t feel that’s appropriate, that the IRS should be looking into people’s bank accounts.”
“They’re trying to get in to see every little thing you’re doing.”
“It could be a little invasive.”
“It’s kind of over the top and I just think that it’s an invasion of privacy.”
“Our bank accounts, you’d think would be somewhat private if you’re just a regular Joe Schmo making money week-to-week.”
“I do not think the government should be intervening in individual bank accounts.”
“It is personal information, that’s why we file taxes, too. You know, they should not have access to all that stuff.”
“I don’t think it’s right, it’s not their business what’s in my bank account.”
Click here or below to view:
Photo Credit: Gage Skidmore licensed under CC BY-SA 2.0
ATRF Announces Release of the 2021 International Trade Barrier Index
The Americans for Tax Reform Foundation today released the 2021 International Trade Barrier Index. Singapore, New Zealand, and the Netherlands scored the top spots for trade liberalization. While India, Algeria, and China ranked the worst for deploying the most protectionist trade barriers. Due to Brexit, the UK is the most improved moving from 8th to 4th as it implements its own tariff schedule reducing trade barriers between it and the rest of the world.
Trade barriers on the rise
The TBI measures the direct and indirect trade barriers imposed by 90 countries affecting 84% of the world’s people and 95% of world GDP. The 2021 edition records a global .5% increase in the use of trade barriers from the first edition in 2019.
Western Europe, as a region, leads the world in open trade. Yet the region was held back by a large number of new digital trade barriers that impose cross-border data restrictions, content moderation, and limit the scope of intermediary liability. Only India, Indonesia, and China impose more digital trade restrictions than the European Union.
Barrier-free trade is associated with beneficial social and economic outcomes. The Index finds countries with lower trade barriers experience more prosperity, economic freedom, and human development; while countries with higher trade barriers perceive greater rates of corruption, abuse of the press, and illicit trade.
The United States largely maintained its restrictive trade profile, improving slightly from 54th to 51st mainly due to nominal reductions in non-tariff measures as a response to COVID-19. Yet the U.S. position as a global rule maker may be in jeopardy as the UK, China, the European Union, and each the 90 countries in the TBI on average signed at least one additional trade agreement granting comprehensive market access and cementing new rules. China also improved its score by reducing its average applied MFN tariff rate.
India increased use of trade barriers to maintain the last spot on the Index. Not only did India increase its MFN average applied tariff rate; at the start of the COVID pandemic India had one of the world’s highest tariff rates on medicines and medical equipment and during the pandemic India added the most restrictive non-tariff barriers on medical equipment and vaccines.
Only six countries with a combined population of 142 million people enjoy the highest level of barrier-free trade, with a TBI score below 3.0 Meanwhile, 13 countries remain in the “highly protected” range with TBI scores above 5.0, where 3.8 billion people have severely limited access to barrier-free trade.
Philip Thompson, author of the Index remarked “it is people who trade, and when barriers are in the way it’s harder to source material, respond to consumer preferences, and create win-win exchanges to recover from a pandemic.”
The Index includes eight case studies from leading free-market think tanks around the world that examine harms trade barriers impose from the availability of affordable housing in Sri Lanka to diversion of legitimate market activity to criminal syndicates in the illicit market.
- Mercosur and the Automobile Industry: Trade Diversion and Protectionism in the Southern Cone; By Pedro Raffy Vartanian & Vladimir Fernandes Maciel, the Mackenzie Center for Economic Freedom, Brazil
- South Africa’s Next Steps for Trade Liberalization, By Christopher Hattingh, Free Market Foundation, South Africa
- Benefits of Bilateral and Multilateral Free Trade Agreements; By Natalia Gonzalez & Tomas Flores, Libertad y Desarrollo, Chile
- The Effects of Pre-Shipment Inspections (PSI) on Food Trade in Indonesia; By Kukuh Sembodho & Arumdriya Murwani, Center for Indonesian Policy Studies, Indonesia
- Protectionist Tariffs Compromising Sri Lanka’s Middle-Income Earners’ Right to Shelter; By Sathya Karunarathne & Aneetha Warusavitarana, Advocata, Sri Lanka
- The Illicit Trade of COVID-19 Items: Poor Trade Enforcement as a Barrier to Access; By Giorgina Agostini, Rowan Saydlowski, & Philip Thompson, Property Rights Alliance, U.S.A
- The Proliferation of Digital Trade Barriers Threatens Innovation, Free Trade; Competition, and Free Speech; By Philip Thompson & Andreas Hellmann, Americans for Tax Reform, USA
- Lessons in High Tobacco Taxes and Smuggling in the Philippines; By Bienvenido S. Oplas, Jr., President, Minimal Government Thinkers, Philippines
The executive summary of the International Trade Barrier Index can be found [here] and the interactive website is [here]
CBO: Dem Healthcare Policies Will Kick Millions of their Healthcare Plans, Increase Deficit
The health care policies being pushed by House Democrats in the reckless, multi-trillion dollar tax and spend reconciliation bill will kick 2.8 million Americans off of their current health plans and force them into government run healthcare, according to a recent letter from the Congressional Budget Office (CBO). These policies will also increase deficits by a whopping $553 billion at a time that the debt remains out of control.
Democrats are attempting to expand premium tax credits and cost-sharing reductions available for health insurance under Obamacare. Additionally, they would include the creation of a federal Medicaid program for states that have not expanded Medicaid under Obamacare. These provisions would cost $553 billion, nearly $14,200 per person, per year. This is twice the cost of the average employer-sponsored plan.
House Budget Committee Republican Leader Jason Smith (R-Mo.), House Energy and Commerce Committee Republican Leader Cathy McMorris Rodgers (R-Wash.), House Ways and Means Committee Republican Leader Kevin Brady (R-Texas), and House Education and Labor Committee Republican Leader Virginia Foxx (R-N.C.) sent a letter to the CBO on October 5th requesting that the office reveal the cost and coverage impact of the health care provisions included in the reconciliation bill draft.
The CBO found that Democrats’ plan would result in at least 2.8 million Americans losing their employer-sponsored health plans and, instead, being pushed onto government health insurance.
The Ways and Means Committee Republicans released a statement detailing several of the CBO’s other findings:
- “The permanent expansion of Obamacare’s advanced premium tax credit (PTC) subsidies will cost American taxpayer’s roughly $210 billion over 10 years and cement approximately 3.4 million Americans into a government program – this includes 1.6 million Americans who were previously covered by employer plans.
- The subsidies will overwhelmingly benefit wealthier Americans more than the vulnerable. $26 billion will go towards individuals making more than 700% of the federal poverty level (FPL) or roughly $90,000 per year.
- The subsidies are untargeted: roughly $200 billion in PTC spending – over 77 percent – is dedicated to those who benefit from Democrats eliminating means-testing on Obamacare subsidies and those who are already insured.
- Further mandates on job-creators would cost $11 billion in taxpayer dollars and lead to approximately 300,000 employees losing their existing job-based health plans.
- Extending premium tax credit subsidies to those receiving unemployment will cost roughly $11 billion over 10 years and further discourage individuals to return to work.
- A new “Federal Medicaid” program will cost taxpayers $323 billion over 10 years to force 3.8 million people onto a new government-controlled health care program, paving the way for a “public option.””
In addition to these health care policies, Democrats are also pushing for the inclusion of H.R. 3 in the reconciliation bill, legislation that would create a 95 percent excise tax on manufacturers and impose an international reference pricing scheme that directly imports foreign price controls into the U.S.
This legislation would stifle innovation, limit Americans’ access to new cures and treatments, would cost high-paying jobs across the country, and would reduce the United States’ global dominance in medical innovation. It would lead to a 29.2 to 60 percent reduction in R&D spending, which translates to 167 to 324 fewer new drug approvals.
Additionally, the pharmaceutical industry directly or indirectly accounts for over four million jobs across the U.S and in every state, according to research by TEconomy Partners, LLC. This includes 800,000 direct jobs, 1.4 million indirect jobs, and 1.8 million induced jobs, which include retail and service jobs that are supported by spending from pharmaceutical workers and suppliers. The average annual wage of a pharmaceutical worker in 2017 was $126,587, which is more than double the average private sector wage of $60,000. H.R. 3 would threaten these existing, high-paying jobs by imposing taxes and price controls on American businesses.
The healthcare policies being pushed by Democrats will end up hurting families and patients. It will increase the federal deficit, reduce access to lifesaving cures, and kick millions off their healthcare coverage. To be clear, this is just one of many reasons to oppose Democrats’ reconciliation bill - the legislation also imposes crippling tax hikes, a radical expansion of welfare, Green New Deal climate policies. These reckless policies should be rejected.
Photo Credit: "Health Insurance Claim Form" by Franchise Opportunities is licensed under
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To Protect Due Process, Lawmakers Should Reject the False Claims Amendments Act
Tomorrow, the Senate Judiciary Committee will be holding a markup on S. 2428, The False Claims Amendments Act of 2021, legislation introduced by Senator Chuck Grassley (R-Iowa) and Patrick Leahy (D-Vt.). This bill would flip due process on its head by modifying the burden of proof in False Claims Act (FCA) cases so that companies would be required to prove their innocence, instead of requiring the government to prove its own case against defendants. Lawmakers should reject this proposal.
Specifically, the legislation requires defendants to disprove the plaintiff’s contention with a heightened “clear and convincing” standard of proof. In this way, the defendant’s burden to prove their innocence is higher than the plaintiff’s burden of proof to prove the defendant’s guilt. To make matters worse, this would apply retroactively to any FCA case that is pending on the date of enactment.
FCA cases are taken up when the government suspects a company has falsely billed the government, over-represented the amount of a delivered product, or under-stated an obligation to the government.
Adopting this new evidentiary standard ignores the views of an unanimous Supreme Court. Universal Health Servs. v. U.S. ex rel. Escobar explained that the FCA materiality element is “demanding” and “rigorous” because of its potentially penal application, detailing that the FCA “is not ‘an all-purpose antifraud statute’ or a vehicle for punishing garden-variety breaches of contract or regulatory violations.”
In this case, the Court required the government to prove that the alleged false claim “went to the very essence of the bargain,” but imposed no additional burden on defendants in these cases. Imposing a higher burden of proof for defendants than for plaintiffs in these cases is the opposite of what the SCOTUS attempted to achieve in Escobar.
While this amendment makes it more difficult for companies to defend themselves, it also shifts the cost of government discovery to defendants. It would require defendants to pay the government’s attorney fees and discovery costs unless the defendant proves that the information sought is “relevant, proportionate to the needs of the case, and not unduly burdensome.” As the National Law Review notes, this would “effectively require defendants to pay for the costs of government discovery in nearly every case because of the practical impossibility of proving a negative – the absence of an undue burden on the government.”
The Grassley-Leahy bill would establish an evidentiary standard that is antithetical to both the aforementioned 2016 SCOTUS case and the principles which guide the function of our court system. If lawmakers are serious about protecting defendants’ presumption of innocence, a principle core to this country’s judicial system, they should reject this legislation.
Photo Credit: "Tower of Light" by Victoria Pickering is licensed under CC BY-NC-ND 2.0.
More from Americans for Tax Reform
VIDEO: Americans Oppose IRS Snooping on Their Bank Account
Today Americans for Tax Reform released a video compilation of on-the-street interviews from local news reports showing firm, categorical opposition to the concept of IRS snooping on their bank accounts. The Democrats' new $10,000 threshold changes nothing.
Excerpts from the video:
“I don’t see what business it is of anyone’s what I spend out of my bank account."
“No, it’s not their business. I already tell them enough.”
“I don’t feel that’s appropriate, that the IRS should be looking into people’s bank accounts.”
“They’re trying to get in to see every little thing you’re doing.”
“It could be a little invasive.”
“It’s kind of over the top and I just think that it’s an invasion of privacy.”
“Our bank accounts, you’d think would be somewhat private if you’re just a regular Joe Schmo making money week-to-week.”
“I do not think the government should be intervening in individual bank accounts.”
“It is personal information, that’s why we file taxes, too. You know, they should not have access to all that stuff.”
“I don’t think it’s right, it’s not their business what’s in my bank account.”
Click here or below to view:
Photo Credit: Cliff from Arlington, Virginia, USA, CC BY 2.0
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