How the Trump Republican Tax Cuts Are Helping West Virginia
West Virginia is benefiting greatly from the Tax Cuts and Jobs Act enacted by congressional Republicans and President 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, West Virginia American Water, Appalachian Power Co., and Potomac Edison (see below) all passed their tax savings on to their customers.
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
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.
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
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.
"Bottom line: starting Sept. 1, the tax reduction will lower bills for typical ... residential customers by nearly $2 per month," FirstEnergy spokesman Todd Meyers wrote in an email on Friday. FirstEnergy is the parent company of Potomac Edison.
"That means our average residential customer using 1,000 kilowatt-hours per month will see their monthly (bill) fall to $108.25 from $110.22," - August 24, 2018, Herald Mail Media
Davis Trust Company (Elkins, West Virginia) - 3% across the board pay raises (on top of existing compensation structure.)
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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Obhof Leaves Ohio Senate with Legacy of Conservative Leadership
With 2020 coming to an end, now-former Ohio Senate President Larry Obhof has left a conservative legacy on a broad section of issues, from education, and criminal justice, to tax and regulatory policy.
Sen. Obhof led on regulatory reform that would prevent the growth of the regulatory state, and eliminate 30% of state regulations currently in place. Late last session, the final plank of that plan passed the House in Ohio Sb1.
Senator Obhof stated “This is perhaps the most sweeping regulatory reform in modern Ohio history…Now, we all know that some regulations are necessary for health and safety and the environment, but many of these restrictions create unnecessary hurdles for Ohio’s small businesses. We don’t need 100,000 more regulations than other states.”
On school choice, Senate bill 89 will expand the ability for parents to put their children in the best school possible through voucher programs. This bill offers low income scholarships to underserved communities. Obhof championed the bill and was a key player in ensuring it passed.
Under Obhof’s leadership, the Senate enacted multiple occupational licensing reforms. Ohio in 2019 had over 18 percent of their work force licensed in order to operate. SB 255 reduced this number dramatically, allowing fewer barriers to entry in competition across many industries. This served as a blessing particularly for low income residents as licensing fees and costs of education can keep those eager to compete out of the game entirely. According to a report from the Institute for Justice in 2019, Ohio Was losing almost 68,000 and $6 billion in inefficiency due to these burdensome licensing hurdles.
Obhof has also helped protect Ohio taxpayers from aggressive tax increases, and found ways to trim burdens. “Let me save you some time on this. There is 0% chance @OhioSenateGOP will raise income taxes,” Obhof tweeted last year in response to progressive groups.
On criminal justice reform, the Obhof-led Senate saw passage of a significant drug sentencing reform bill, SB3. The Senate put in the hard work of adjusting the bill over nearly two years, which led to its overwhelming passage. Unfortunately, despite the House likely having the votes to pass the bill as well, leadership ducked holding a floor vote.
With a House chamber in turmoil following an FBI investigation of one speaker, and forcing his resignation, which only gave way to Larry Householder and his ensuing mass bribery scandal, the Ohio Senate has had to often stand alone in putting taxpayers first.
Senator Obhof’s leadership and accomplishments have kept hard-earned dollars in the pockets of Ohio families, and made the state a leader on licensing and regulatory reform, so it is now easier to work and do business in the state. There is more to be done, and if both chambers follow this example, more conservative reform will get done.
Photo Credit: Ohio Senate
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Five Reasons to Oppose H.R. 1, Democrats’ Attempt to Consolidate Power
Rather than pushing policies that will help the economy recover, the top priority for Congressional Democrats is legislation that will dramatically alter the American political system and consolidate power in the hands of the Left.
This legislation, designated H.R.1 in the House and S. 1 in the Senate, has been given the misleading name “For the People Act.” This proposal would fundamentally transform how elections are conducted in the United States, would politicize the Federal Elections Commission, and would directly violate constitutional mandates like free speech and states’ freedom to determine their own election laws.
This 800 page bill is packed with alarming proposals that should be rejected by Congress. Here are five reasons to oppose H.R. 1.
1) H.R. 1 Shows Democrats Care About Consolidating Power More Than Rebuilding the Economy. Each Congress, “H.R. 1” or” S. 1” is reserved for whatever bill is the biggest priority for the party that controls the House or Senate. At a time where millions of Americans are out of work, it is telling that Democrats’ priority is to overhaul election law. This policy would do nothing to help the economy recover or to help the country fight to Coronavirus pandemic.
2) H.R. 1 Would Politicize the Federal Elections Commission (FEC). Under current law, the FEC is comprised of a six-member bipartisan committee: three Republicans and three Democrats. In order to move forward with any prosecution of alleged campaign violations or investigations, the FEC needs four votes. This law would limit the member number to five, therefore including two Republicans, two Democrats, and one “independent” from a minor political party. Under this rule, a president could appoint a Bernie Sanders-style “independent” to serve as the fifth member of the FEC. To make matters worse, under this law, a president could also pick the Chairman of the FEC, all but ensuring total presidential control of the Commission.
3) H.R. 1 Creates Taxpayer-Funded Candidates. The legislation implements a 600% match for certain political contributions to congressional and presidential candidates, forcing taxpayers to subsidize political campaigns – even campaigns that they may disagree with. Provisions like this have been abused in the past several times. In addition to being a poor use of taxpayer money, this attempt to end political corruption actually creates greater opportunity for corruption.
4) H.R. 1 Would Invalidate Numerous State Election Laws. Article I Section IV of the U.S. Constitution empowers states to determine the “Times, Places and Manner of holding elections…” H.R. 1 would make significant strides in stripping states of this power. It would force states to implement early voting, automatic voter registration, same-day registration, online voter registration, and no-fault absentee balloting. Additionally, the bill would invalidate voter identification laws all across the country by allowing voters to simply sign a statement affirming their identity as they enter their polling place.
5) H.R. 1 Would Suppress Free Speech. This law would implement a “public file” requirement for any person or organization spending over $500 in a calendar year, forcing them to identify the name, address, and contact information of ad sponsors that are not candidates or with the campaign. It also invents a new regulation called “PASO,” an overbroad standard that asks whether political speech “promotes,” “attacks,” “supports,” or “opposes” a candidate or official.
In addition, H.R. 1 undoes the FEC’s “internet exemption” which excludes the internet from regulation of political speech, exposing online communication to the same scrutiny as traditional advertisements. This even includes any communication an organization makes on social media platforms like Twitter and Facebook, including paid staffers managing the platforms. The bill expands the “stand by your ad” disclaimer in video advertisements, forcing organizations to identify their top five donors at the end of advertisements. With the incredible rise in partisanship, cancel culture, and doxing, it is more important than ever to protect donor privacy. This isn’t a matter of transparency; rather, it is a new tool to chill speech.
H.R. 1 is a dangerous piece of legislation. This legislation would suppress free speech, invalidate state laws, create taxpayer-funded candidates, and do nothing to help the economy or fight the Coronavirus pandemic. This Democrat power grab should be rejected.
Photo Credit: Gage Skidmore
State Lawmakers Take Action To Protect Churches From Unwarranted Property Tax Assessments
In 2018, nearly 500 churches hosting homeschool groups in all 50 states, specifically those hosting Classical Conversations communities, received letters informing pastors that they were breaking the law. By accommodating these homeschool groups, the letter-writer accused the churches of violating the IRS’s 501(c)(3) income tax exemption, thereby jeopardizing not only their nonprofit status but also making them vulnerable to property tax liability.
In response to this threat, many churches no longer permit any outside groups to utilize their facilities. However, some state lawmakers are beginning to take action in response, passing legislation to clarify that churches can host homeschool groups without jeopardizing their tax exempt status. That’s what lawmakers in Oklahoma did in 2020. Their counterparts in other state legislatures should follow suit in 2021.
The issue at hand is not whether a group using the property is a for-profit or nonprofit organization. The issue is whether the use of the property by the group is an exempt or nonexempt purpose.
In order to avoid unnecessary restrictions on facilities that can be used by homeschooling groups, state lawmakers should amend their tax codes to clarify that the use of exempt church property may be utilized by for-profit organizations for educational purposes. Existing state laws generally support such usage, but some laws have more ambiguous language that could cause tax assessors to make inconsistent or incorrect evaluations.
Clarification legislation here would provide property tax assessors more guidance as they do their work and significantly reduce the possibility that a church could lose its property tax exempt status under state law for allowing a homeschool group to use its property.
State lawmakers in Oklahoma have already successfully amended their tax codes with such clarifying language. The clarification bill in Oklahoma, HB 2504, was enacted in May 2020. This clarification has brought peace of mind and confidence to several Oklahoma church leaders who now allow homeschool groups to use their church buildings again.
Americans for Tax Reform encourages governors and lawmakers in other states to follow Oklahoma’s lead by enacting similar clarification legislation protecting churches and other places of worship from unjust and incorrect property tax assessments.
Top 5 Reasons Why DSTS Are a Bad Idea
The European Union has promised to impose Digital Services Taxes (DSTs) targeted at American tech companies. The EU is attempting to restrain American success through these DSTs. If the EU successfully passes this unprecedented international tax, America’s innovative future is at serious risk.
Here are the top 5 reasons why DSTs are a bad idea.
- 1. DSTs might lead to double taxation.
Traditionally, businesses pay income tax on actual profit. With DSTs, companies will have to pay a revenue tax on any earning gained through search energies, social media services, and online marketplaces. Companies will now pay both income and revenue tax, a double taxation.
- 2. DSTs will ultimately hurt consumers and workers – in the U.S. and abroad
Large tech companies will have to increase overall costs in response to losing significant profit to DSTs. Workers will directly feel the impact of these increased costs through decreased pay and jobs. Third-party sellers, in partnership with large tech companies, will have to increase their prices to remain competitive. This will lead to consumers being charged more for services.
- 3. DSTs could lead to a trade war.
By passing this unprecedented tax, it will soon become the norm. The EU will have the green light to impose escalating tariffs on America continuously. This will compromise jobs and businesses on a global scale.
- 4. The EU will target more American companies.
At the moment, DSTs are targeting large tech companies. By imposing DSTs, smaller American businesses will be open to EU overreach. If the EU can directly steal from giant corporations, they will indeed find a way to tax smaller tech companies. This will put at risk American innovation and competitiveness.
- 5. Profit from DSTs will line the wallets of the EU.
The EU is using DSTs as an easy source of money. The profit they will gain from taxing large American tech corporations will be invested in EU competitiveness. This money grab will surely benefit the EU at the expense of American business.
The Trump administration has fought to protect American innovation by opposing an international tariff system. The Biden administration needs to continue this sentiment. DSTs are both an economic and diplomatic liability. Rejecting DSTs ensures the prosperity of America’s financial and innovative success.
Photo Credit: The Left
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Gov. Kim Reynolds Wants to Deliver Tax Relief in 2021
Taxpayers across the country are very likely to face a number of federal tax increases in the coming year. At least for taxpayers in Iowa, they can rest assured that they will not be facing any tax hikes at the state-level.
In her Condition of the State Address, Gov. Kim Reynolds assured Iowans that they would not see any state tax increases this year. “And remember, that unlike many states we’re starting from a good financial position,” explained Gov. Reynolds. “We aren’t looking at tough budget cuts and we’re certainly not looking at raising taxes.”
And making that promise even better, Gov. Reynolds said she would like to build on her pro-taxpayer reputation by delivering more tax relief. In 2018, Gov. Reynolds signed the largest state tax cut in Iowa history into law. Once fully implemented, that pro-growth tax reform package will provide Iowans with $2.1 billion in tax relief.
That tax law reduced the rate of every single one of Iowa's nine individual income tax brackets. This has been a huge win for individual taxpayers and families, as it allowed them to keep more of their hard-earned paychecks. It was also a big victory for small businesses, which file their taxes under the individual code, as it allowed them to invest more resources in jobs and higher wages.
In 2023, that law could do even more to help taxpayers and make Iowa a more attractive place to live, invest, and do business. Once fully implemented, it will reduce the number of individual income tax brackets from nine to four and lower the top rate from 8.53 percent to 6.5 percent. The catch here is that this component of the bill is subject to certain revenue triggers being met. While official projections have Iowa coming very close to reaching those triggers, if they fall even the slightest bit short, the tax cuts will be delayed.
Gov. Reynolds would like to guarantee that relief is provided and maybe go even further. “If anything, we need to continue the conversation about cutting taxes, and we can start by getting rid of the unnecessary triggers that were put in place in 2018,” said Gov. Reynolds. “Let’s make Iowa more competitive and guarantee our taxpayers that they can keep more of their hard-earned money.”
At present, Iowa’s top marginal individual income tax rate – the part of the income tax that is most commonly used to make decisions about investment – is in the top 10 highest in the country. To ensure that Iowa definitely becomes more competitive, Gov. Reynolds, at minimum, would like to remove the triggers to make sure the promised cuts take effect.
Even better news for Iowans is that newly elected Senate President Jake Chapman has always viewed tax relief as a top priority. In a recent interview with The Gazette, President Chapman explained:
“Now more than ever is when we need to be implementing tax cuts. We need to stir our economy as never before, and one of the ways we do that is through tax cuts. I’m talking about individual tax cuts, I’m talking about people who are paying capital gains, who are wanting to bring their business back or start a business. This is the time to really focus on how we can begin to implement tax cuts that will lead to the total elimination of income tax. My hope is that we do focus on how we can reduce taxes and eventually eliminate the income tax.”
Reducing and phasing out the state income tax would be a huge win for all Iowans. Putting the income tax on the path to zero would allow Iowa to compete with more states for businesses looking to expand, investors looking for growing economies, and families looking for better opportunities – all of which would bring new jobs and higher wages to the state.
Photo Credit: Iowa Public Radio Images
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Pete Buttigieg Puts Gas Tax Hike “On the Table” During Confirmation Hearing
Only two days in office and the Biden administration is already considering breaking President Biden’s campaign promise that “anyone making less than $400,000 a year won’t pay a penny more” in taxes.
During his Senate confirmation hearing for Transportation Secretary, Former Mayor Pete Buttigieg told members of the Commerce, Science and Transportation Committee that a gas tax increase is “on the table” as a means to pay for infrastructure spending.
When asked directly by Sen. Rick Scott (R-Fla.) if he supported increasing the gas tax and by what amount, Buttigieg replied, "I think all options need to be on the table, as you know, the gas tax hasn't been increased since 1993 and it's never been pegged to inflation."
“There are several different models, in the short to medium term that could include revisiting the gas tax, adjusting it, and or connecting it to inflation," Buttigieg continued when pressed by Sen. Scott to provide more detail.
WATCH:
Support for a federal gas tax increase would be a clear violation of President Biden’s pledge to not raise any taxes on any American making less than $400,000 per year. According to the Congressional Budget Office, raising the tax rate on gasoline would “impose a proportionally larger burden, as a share of income, on middle- and lower-income households,” while also imposing “a disproportionate burden on rural households.” Biden must immediately disavow a gas tax hike if he wants to stay in compliance with his pledge to the American people.
Buttigieg’s consideration of a gas tax increase also directly contradicts other statements issued by President Biden on the campaign trail.
“I’ve tried this before, we’re not going to be able to raise the gas tax,” President Biden said at an infrastructure forum in Las Vegas in February. “I don’t think we’re going to be able to raise the gas tax from what it is now to what it would be had it been raised for inflation,” Biden continued.
During today’s hearing, Buttigieg also raised the possibility of creating a new “vehicle miles traveled” (VMT) tax that would charge drivers based on a per-mile tax but cautioned that the technology might not be ready to support implementing this policy while also raising privacy concerns.
Photo Credit: Wikimedia Commons
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Massachusetts' Flavor Ban Disaster
When Massachusetts implemented a ban on all flavored tobacco products, including menthol cigarettes and flavored smokeless tobacco, in the middle of 2020, experts predicted it would have no impact upon smoking rates despite what proponents of the ban claimed. Critics of the ban predicted that while failing to curb smoking, the ban would impose serious cost to the Commonwealth in the form of plummeting tax revenue caused by cross-border purchases and the creation of a booming black market.
With six months of data now available, these predictions have proven accurate. As a direct result of the ban, the Bay State is losing more than $10 million a month in tax revenue to neighboring states and criminal black-market syndicates, while smoking rates remain unchanged.
The data is undisputed. Since the flavored tobacco products ban took effect, Massachusetts retailers have sold 17.7 million fewer cigarette packets compared to the same six months in the prior year, while neighboring Rhode Island and New Hampshire have combined to sell 18.9 million more as Massachusetts residents stock up across state lines. The loss to the state, already in the midst of a fiscal crisis brought on by the Covid-19 pandemic, has thus far been a staggering $73,008,000. Given fewer than $5 million of the over $500 million the state collects in tobacco excise is spent on smoking cessation programs, the remainder allocated to the general fund, this shortfall will likely lead to further tax increases, hurting struggling families and businesses at the time the can afford it least.
While the states of Rhode Island and New Hampshire have been some of the biggest beneficiaries of Massachusetts’ ban, collecting close to $50 million in additional revenue, criminal syndicates have also benefited. Even prior to the ban, illicit tobacco accounted for over 20% of tobacco consumed in Massachusetts. Contrary to popular belief that tobacco smuggling a victimless crime consisting of someone purchasing a few extra cartons across state lines, in reality most tobacco smuggling is run by multi-million dollar organized crime syndicates. These networks, who also engage in human trafficking & money laundering, have also been used to fund terrorist and the US State Department has explicitly called tobacco smuggling a “threat to national security”.
The Massachusetts Department of Revenue is not the only loser, however. Thousands of Bay State small business owners operating convenience stores and gas stations, many of whom are already struggling amid the pandemic-driven downturn, are losing even further as they are unable to sell products their competitors across the state line are able to offer, or that can be found from an illegal seller.
In addition to lost revenue and the financing of criminal activities, another adverse effect of these bans is the disproportionate harm it inflicts upon minority communities. Approximately 80% of blacks and 35% of Latinos who choose to smoke prefer menthol cigarettes, and black adults are 60% of cigarillo and non-premium cigars smokers, with these products often flavored. For this reason, civil liberty organizations such as the ACLU and the Law Enforcement Action Partnership oppose flavor bans as they “disproportionately impact people and communities of color.”
With flavor bans failing to reduce smoking in Massachusetts (as they have failed in multiple other jurisdictions), it is time for regulators to look for a better way to reduce smoking rates. Fortunately, one exists. Reduced risk tobacco alternatives, such as personal vaporisers, have been overwhelmingly proven to be 95% safer than combustible cigarettes, and at least twice as effective as more traditional nicotine replacement therapies, leading to the sharpest declines in both adult and youth smoking on record. For this reason, they are and endorsed by 32 of the world’s leading medical bodies and promoted as a quit smoking aid by government agencies such as Public Health England. Extrapolating from a large scale analysis by the US’s leading cancer researches and co-ordinated by Georgetown University Medical Centre, if a majority of Massachusetts smokers made the switch to vaping, close to 150,000 lives would be saved; nationally the number would be 6.6 million
The ban on flavored tobacco in Massachusetts has done nothing to reduce smoking rates or youth uptake, but has led to a sharp plunge in tax collections and done unnecessary harm to small businesses. Massachusetts is a cautionary tale for other states, demonstrating the unintended negative consequences that ill thought out bans result in.
Photo Credit: Lindsay Fox
More from Americans for Tax Reform
Five Reasons to Oppose Biden’s Plan to Raise the Corporate Tax Rate
President Joe Biden has proposed raising the corporate tax rate from 21 percent to 28 percent as part of his plan to raise taxes by as much as $4 trillion over the next decade.
Any effort to raise taxes on businesses should be rejected. It will prolong the economic downturn and harm workers and businesses. It will make America a less competitive place to do business and could see a return of corporate inversions and an increase in foreign acquisitions. It will also harm Americans that have their savings in a 401(k) or IRA or have begun investing in the stock market.
Here are five reasons to reject efforts to raise the corporate tax hikes:
1. Raising the corporate rate will prolong the economic downturn
Now is the worst time to raise taxes on businesses because the economy is weak and millions of Americans are out of work. Raising the corporate rate will make it harder for businesses to hire new Americans, prolonging the economic downturn.
Because of government mandated lockdowns and restrictions, 140,000 jobs were lost in December according to the Bureau of Labor Statistics. While 11 million jobs have been recovered since the peak of the pandemic, this represents just half of the total jobs lost.
Make no mistake - there is significant work to be done in order for the economy to fully recover. In the meantime, businesses and workers remain vulnerable. Rather than pushing tax increases, we should be pushing policies that encourage investment and job creation.
Even former President Barack Obama has warned against tax increases during an economic downturn. As Obama noted:
"The last thing you want to do is raise taxes in the middle of a recession because that would just suck up, take more demand out of the economy and put businesses in a further hole."
2. Raising the corporate rate will harm workers and families
Biden’s plan to raise the corporate rate will harm workers and families, with the costs of the tax passed down to them.
Numerous studies have found that between 50 percent and 70 percent of the corporate tax is borne by workers with the remaining being borne by shareholders. This means that increasing the corporate tax rate harms workers and reducing the tax benefits workers.
Not only is the correlation between worker wages and business taxes seen in economic studies, it has been seen in the strong economic conditions following the Tax Cuts and Jobs Act (TCJA), which reduced the corporate tax rate from 35 percent to 21 percent.
After the TCJA was signed into law, American workers saw unprecedented prosperity.
The unemployment rate hit 3.5 percent in 2019, a 50-year low.
Median household income increased by $4,440 or 6.8 percent – the largest one-year wage growth in history. Average hourly earnings grew by 3 percent or more for 20 consecutive months between 2018 and the start of 2020, according to BLS.
The bottom 25 percent of wage earners saw 4 percent or greater annual monthly wage growth for 26 consecutive months under President Trump, according to the Atlanta Fed. This wage growth was greater than the top 25 percent of wage earners in every month.
Under this economy, there were more job openings than job seekers for 24 consecutive months. In March 2018, the ratio of unemployed persons to job openings dropped to 0.9. This ratio remained below 1.0 until the pandemic when it began to rise in March 2020.
Unfortunately, the COVID-19 pandemic put an end to this strong economy. However, the benefits in the years and months after the TCJA was passed are clear.
3. Raising the corporate rate will make the U.S. less competitive.
Biden’s plan to raise the corporate rate to 28 percent, which would be about 32 percent after state taxes, would give the U.S. one of the highest rates in the developed world.
The U.S. rate would be higher than key competitors such as the United Kingdom (19 percent), China (25 percent), Canada (26.5 percent), Ireland (12.5 percent), Germany (29.9 percent) and Japan (29.74 percent), according to data compiled by the Organisation for Economic Co-operation and Development (OECD).
Many countries also have lower rates for certain industries to encourage innovation and investment. For instance, China has a 15% rate for industries including high tech enterprises, while the United Kingdom has a 10 percent “patent box” rate for businesses that depend on patented inventions and innovations.
The U.S. is already lagging behind when it comes to promoting innovation. According to a Manufacturing Leadership Council study, the U.S. ranks 26th in research and development tax incentives when ranking the 36 developed countries in the OECD.
4. Raising the Corporate rate could lead to a return of foreign inversions and acquisitions
If Biden raises the corporate rate, it could cause a return of corporate inversions and see a surge in foreign acquisitions of U.S. businesses.
Concern over inversions grew during Obama’s second term because a number of large American businesses with combined assets of $319 billion announced plans to invert in 2014, according to the Congressional Budget Office.
Inversions occur when a U.S. business merges with, or acquires, a foreign business with the intent of incorporating the new, combined entity overseas. This happened because the U.S. tax code was uncompetitive and businesses were moving to countries with more competitive tax codes.
The inversion problem was solved when the TCJA was signed into law. In fact, after the TCJA, companies began to come back to America. The inversion problem was just one indicator of American uncompetitiveness. Prior to the TCJA, American businesses were vulnerable to foreign acquisitions.
According to a study released by EY, American companies also suffered a net loss of almost $510 billion in assets between 2004 and 2017. This was because the high U.S. rate and worldwide tax system meant non-U.S. companies could outbid U.S. companies.
If the corporate rate was lower between 2004 and 2017, the study estimates that U.S. companies would have acquired a net of $1.2 trillion worth of assets, meaning that more than $1.7 trillion in assets were lost because of the uncompetitive U.S. rate.
5. Raising the corporate rate will harm Americans with a 401(k) or invested in the stock market
Biden’s plan to raise the corporate rate will also harm the life savings of millions of Americans that are invested in the stock market or that are saving for retirement through a 401(k) or IRA. Raising the corporate tax rate will reduce the value of stocks, reducing the value of these life savings.
This has the potential to impact Americans across the country. According to recent data, 80 to 100 million Americans have a 401(k), while 46.4 million households have an individual retirement account.
A majority of the assets in these accounts are invested in stocks. 401(k)s hold $6.2 trillion in assets and almost 70 percent of these assets (or $4.3T) are in stocks.
Similarly, 53 percent of the more than $11 trillion in IRA savings are held directly in stocks while another 18 percent of savings are invested in funds that comprise stocks.
This is not the only source of life savings that could be reduced by Biden’s tax increase. 19 million Americans rely on public pension funds for their retirement and roughly half of the $4 trillion in savings is invested in stocks.
This could also impact younger Americans that have begun investing in the stock market to increase their savings. Half of Gen-Zers and Millennials have begun trading in stocks as a way to increase their life savings, according to recent reports. Across the entire country, as many as 53 percent of American households’ own stock, according to the Federal Reserve. In addition, over 70 percent of households in the “upper-middle income group” owned stocks and the median value of these portfolios was over $40,000.
Photo Credit: Matt Bargar
Fond Farewell to FCC Chairman Ajit Pai
Americans for Tax Reform would like to express our gratitude for the important work that Federal Communications Commission Chairman Ajit Pai accomplished throughout his tenure.
The following statement can be attributed to Grover Norquist, President of Americans for Tax Reform:
"During the Trump Administration, Ajit Pai’s nomination as Chairman of the FCC was second in importance only to Neil Gorsuch. Chairman Pai stood up to doomsayers prophesizing the destruction of the internet if the government didn't exert more control over the internet's infrastructure. Guess what — It didn’t happen. Even under the added stress of the pandemic, the internet not only worked, it thrived. Congratulations to Chairman Pai's many successes at the helm of the Commission, and I wish him well in his future endeavors."
The following statement can be attributed to Katie McAuliffe, Executive Director of Digital Liberty and Americans for Tax Reform’s Director of Federal Policy:
"Chairman Pai led the most transparent and productive FCC in years. No longer are DC insiders the only ones to know beforehand what the Commission is doing. Under his direction, proposed orders and rulemakings had to be publicly available three weeks in-advance of an FCC vote. Before, items were not public until after the Commission voted on them. For daring to remove excessive regulations on the internet, Chairman Pai faced harassment and threats of violence against him and his family. But it was those actions nonetheless that kept the internet working, while connecting more Americans than ever to broadband, throughout this pandemic. I thank him for his service and look forward to what the future has in store for such a dedicated public servant."
The Pai FCC has a long list of accomplishments ranging from internal agency reforms to deregulatory policies that maximized benefits to all Americans.
During the Pai FCC, the Commission doubled its productivity from previous ones. The average Commission meeting under Chairman Pai voted on 6 items while previous ones ranged 2 – 4. The Pai FCC did this while reaching record levels of bipartisanship as well.
Chairman Pai remarked that when he was just a staffer at the FCC, he was told dozens of times that agenda items could not be made public before Commission meetings. As Chairman, he changed that policy in the first two weeks to increase transparency. The result was that the American people now have the same access to agency plans that only lobbyists or DC insiders had before.
Chairman Pai also ensured the FCC would have access to sound economic analysis for agency decision making. During his tenure he advocated for the creation of the Office of Economics and Analytics at the FCC. This new office consolidated economists across the agency which increased independence and added to the professionalism of their work.
In 2018, the Pai FCC passed the Restoring Internet Freedom (RIF) Order, which repealed short-lived Obama-era regulations on internet-service providers. Activists on the left scare mongered that this would bring “an end to the internet” or that the internet would populate one word at a time. These claims were absolutely baseless. In actuality, in the two after passage of RIF, we saw increases in broadband investment, increases in network speeds, and 10x times the number of cell sites deployed than in previous years. This occurred despite the COVID-19 pandemic where internet traffic dramatically increased. In places like Europe where they held onto their utility-style regulation, they saw decreases in speeds, and had to take preventative measures to prevent networks collapsing.
The Pai FCC also took unprecedented steps to repurpose spectrum. Spectrum is a finite resource that is necessary for wireless communications. Repurposing spectrum is a must be done, but it can be immensely difficult. To quote the Chairman, “there is no more greenfield spectrum available. That means there are no easy solutions. Whenever you explore new uses for spectrum, you’re going to draw battles with incumbents or others worried about harmful interference.” In 2018 Chairman Pai promised to make more spectrum available for 5G over the next 3 years than what was already available. And he did it. The Pai FCC opened up almost 5,000 megahertz of spectrum for use by 5G technologies.
Americans now rely on the internet more than ever to go to work, go to school, and receive healthcare. The Pai FCC laid the groundwork to reverse-auction billions in funding to develop rural broadband and telehealth programs; ensuring that American tax dollars will be put to their best use in bridging the digital divide.
These accomplishments are just a handful of many that will improve the lives of American citizens and businesses in ways obvious, and no-so-obvious ways for a generation to come. We wish the Chairman the very best of luck on what the future has in store for him.
Photo Credit: Gage Skidmore
Despite Yellen Claim, Biden and Harris have called for Elimination of TCJA at Least 22 Times
Janet Yellen, Joe Biden's nominee for Treasury Secretary, said during today's Senate Finance Committee confirmation hearing that Biden has "been very clear that he does not support a complete repeal of the 2017 tax law."
However, Joe Biden and Kamala Harris have said at least 22 times that they want to repeal the entire Tax Cuts and Jobs Act.
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