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In the furor over the Supercommitee’s failure to reach an agreement on $1.2 trillion in cuts required by the Budget Control Act, resistance to tax hikes on the part of some Republican lawmakers is being blamed by Democratic leadership and many in the media. Setting aside the apparent fact that there was some willingness among GOP’ers to increase revenues, especially as part of a systemic tax reform deal, the real problem is a refusal to cut spending.
$1.2 trillion in cuts over 10 years is not a very big piece of the projected budget. The National Taxpayers Union and U.S. Public Interest Research Group sent over $1 trillion in bi-partisan cuts to the Supercommittee months ago, none of which involved catastrophic reductions in popular programs. If the Supercommittee could not consider getting rid of such obvious examples of waste, government subsidies, and non-essential programs, there is no reason to even conceive of new taxes being on the table.
So why is there any push for new taxes? Clearly there was a reluctance to not just responsibly spend taxpayer dollars, but halt the meteoric growth of government. Much of the spending implemented after 2008 was so-called emergency spending, like TARP or the stimulus, yet returning to 2008 spending levels did not seem to be anywhere near the top of the Supercommittee’s agenda. The National Taxpayers Union Foundation study on Supercommittee member agendas foreshadowed this week’s outcome.
NTUF noted how far apart members started on their sponsorship of budgetary legislation, as the biggest spending Democrat, Xavier Becerra (D-CA), had a $1.157 trillion agenda and the most cost-conscious Republican, John Kyl (R-AZ), aimed to save $85.0 billion. In fact at the time the report was issued none of the House Democrats sponsored a single bill that would reduce the budget, in spite of the waste we see in Washington, Thus, it is not shocking that people as unconcerned with America’s fiscal state as Rep. Becerra and his friends didn’t come to terms on a meager $1.2 trillion in savings.
Beware of red herrings -- this disagreement over spending levels is the real issue. Raising taxes when there has not even been an attempt to cut waste or duplicative programs is not only completely unacceptable to taxpayers, but would be politically unpopular. In the end, it was the tax-borrow-and-spend caucus in Congress and its unwritten pact to protect the bloated federal budget that torpedoed the Supercommittee.0 Comments | Post a Comment | Sign up for NTU Action Alerts
Alternative Fuel Vehicles Program & Travel Cards in NTUF's Taxpayer's Tab
Did you miss this week's issue of NTUF's Taxpayer's Tab? If so, here's a quick recap.
This week NTUF puts two bills head-to-head: S. 1001, introduced by Senator Ron Wyden (D-OR) [pictured], would expand would expand the Advanced Technology Vehicles Manufacturing Incentive Program and would fund research into alternative fuels infrastructure. The bill would provide federal funding in the form of direct loans or loan guarantees to help existing facilities retrofit their operations to produce energy-efficient light-duty vehicles and their components or to develop alternatively-fueled vehicles. NTUF estimates that S. 1001 would cost taxpayers $958 million over five years.
Congressman Bill Flores (R-TX) has sponsored H.R. 3306, which would eliminate, rather than expand, the ATV Manufacturing Loan Program. According to statements made by Congressman Flores for the Republican Study Committee’s YouCut initiative, H.R. 3306 would result in a $4 billion taxpayer savings in the first year of implementation.
The WildCard: Congressman Kevin Brady (R-TX), Congressman Rick Larsen (D-WA), and Senator Maria Cantwell (D-WA) have introduced -- H.R. 2042, H.R. 3312, and S. 1487 -- the APEC Business Travel Cards Act to decrease travel time for businessmen and women from countries in the Asia-Pacific Economic Conference (APEC).
The Least Expensive Bill: Congressman Jeff Denham (R-CA) and Senator Scott Brown (R-MA) have sponsored H.R. 1734 and S. 1503, the Civilian Property Realignment Act, "to reduce the budget deficit by streamlining the federal property disposal and realignment process." Sixty percent of the proceeds from the sales would be required to go to deficit reduction. Senator Brown cites an OMB estimate that the bill would save taxpayers $15 billion over three years. CPRA authorizes $88 million in new spending for the commission, which NTUF subtracted from the initial $15 billion.
The Most Friended Bill: Congressman Bob Goodlatte (R-VA) has sponsored H.R. 704, Security and Fairness Enhancement (SAFE) for America Act of 2011. The SAFE Act would eliminate the Diversity Immigrant Visa Program. CBO determined that H.R. 704 would save $147 million over its first four years starting in FY 2013. The elimination of the program would result in fewer immigrants coming into the country -- approximately 51,000 annually -- and fewer permanent residents. House cosponsors include three Democrats and 40 Republicans.
For more details, including NTUF's preliminary cost estimates for each of these bills, read the entire Taxpayer's Tab online.0 Comments | Post a Comment | Sign up for NTU Action Alerts
Hoyer's Newfound, Nonsensical Opposition to a Balanced Budget Amendment
“The issue of a balanced budget is not a conservative one or a liberal one, and it is not an easy one,” said Rep. Steny Hoyer in 1995 expressing his fears over the $5 trillion debt, “but it is an essential one.”
“I am absolutely convinced that the long term consequences of refusing to come to grips with the necessity to balance our budget will be catastrophic . . . [T]hose who will pay the highest price for our fiscal irresponsibility, should we fail, will be those least able to protect themselves, and the children of today and the generations of tomorrow,” Hoyer concluded.
That was Hoyer in 1995. Tomorrow the House of Representatives will once again vote for a Balanced Budget Amendment, and with the stakes immensely higher than in 1995, Rep. Hoyer has completely flip-flopped.
“What I said in 1995 I absolutely agree with today,” Hoyer told reporters recently. “Unfortunately, I did not contemplate the irresponsibility that I have seen fiscally over the last nine years, or eight years, of the Bush administration . . .
So let me get this straight. Hoyer voted in favor of a Balanced Budget Amendment in 1995 because he was worried about the long-term effects of the federal government’s $107 billion budget deficit and $5 trillion debt. And now, with annual deficits measured in the trillions and our national debt having tripled, Hoyer is whipping against a BBA? And the reason he flip-flopped is that Washington has displayed its inability to act fiscally responsible? Isn’t that one of the chief arguments for voting in favor?
It’s a statement that reeks of politics, of pointing the finger rather than extending a hand. The fact is, the debt has skyrocketed over the last decade under the direction of Presidents and lawmakers from both parties. But now is not the time to lay blame, it’s the time to build consensus that Washington simply isn’t disciplined enough to reduce spending on its own. Because as Hoyer pointed out in 1995, this is not a conservative or a liberal issue – it’s one of necessity.0 Comments | Post a Comment | Sign up for NTU Action Alerts
Supercommittee Going Gimmicky, Markets Set to Panic?
Shot: In an op-ed for Politico, Moody’s chief economist Mark Zandi, explains the potential disaster that lays ahead if the Deficit Supercommittee relies on budget gimmicks to achieve its deficit target.
“On the darkest path, the committee relies on budget gimmicks – like an assumed winding down of the Iraq and Afghanistan wars – to achieve its $1.2 trillion goal in 10-year deficit reduction. The panel could then avoid substantive government spending cuts similar in size to those that would automatically occur beginning in 2013.
Using gimmickry would signal financial markets that it is hopeless to believe Washington can address the nation’s long-term fiscal problems. . . Financial markets would be thrown into turmoil, upending the already shell-shocked collective psyche. The economy would descend back into recession . . .”
Chaser: In a story entitled, “Gimmicks Could Help Rescue Deficit Talks,” the Wall Street Journal reports that it is looking increasingly likely that budgetary sleight-of-hand will be used in any bipartisan deal.
“With Congress’s deficit-reduction supercommittee barreling toward a deadline for striking a big budget deal, both parties are reaching for accounting gimmicks to help reach their target of $1.2 trillion in savings over 10 years.
Some tools are familiar to old Washington hands, such as massaging budget assumptions and painting rosy economic scenarios. Others include taking credit for “saving” money on wars that are ending and putting off until next year what lawmakers don’t want to deal with now.”
Bottom line: Unless Congress gets serious about the need for real deficit reduction to ease jittery markets, Americans should brace for a wicked hangover.
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The Wall Street Journal has an interesting poll up on its site today regarding taxation of retail sales on the internet. The question seems relatively simple: Should states require online retailers to collect sales tax? The thought process for most people probably goes a little something like this..."If it's a sale, it should be subject to sales tax." That probably explains why a huge number of people voted for the (misleadingly-worded) answer "State sales taxes should apply always." Problem is, the "right" answer (from NTU's perspective) is "State sales tax only with physical presence." So please, for the love of all that is holy in proper tax policy (hah!), head over to the WSJ and cast a vote for taxes only with physical presence.
As intuitively appealing as the answer that state sales tax should always apply is, it ignores years of Supreme Court jurisprudence and small-business protections that only require businesses with a legitimate physical presence in a state to collect and remit that state's sales tax. In other words, Andrew Moylan Incorporated would be required to collect Virginia state sales tax because Andrew Moylan Incorporated is physically located in Virginia, but should AM Inc. also be required to collect sales tax for California, New York, Michigan, or any of the other states where it is NOT located? The Supreme Court says no, and rightly so, because that would impose enormous burdens on businesses to navigate more than 7,400 different sales tax jurisdictions across the country.
Keep in mind that, technically, every single sale that is made online is ALREADY subject to taxation. If the seller has a physical presence in the buyer's state, they'll collect and remit sales tax just like your local Target or Wal-Mart. If the seller does NOT have a physical presence, then the buyer is supposed to report the purchase and pay a "use tax" on it directly with the state government. Unfortunately, this use tax regime is a disaster. Most buyers have no clue they owe these taxes and very few actually pay them, so it's not as if there's no problem here at all.
But if proponents of burdensome tax-collection plans were serious about "fairness," they'd advocate a revenue-neutral system that respects our Constitution and preserves tax competition. As NTU noted in a recent news release, one step to explore would be requiring all firms to collect sales taxes only for the jurisdiction where they're based, rather than for multitudes of governments around the country. Another would be supporting Senate Resolution 309 from Senators Wyden (D-OR) and Ayotte (R-NH), which affirms Congress' intent not to give states "the authority to impose any new burdensome or unfair tax collecting requirements on small internet businesses."0 Comments | Post a Comment | Sign up for NTU Action Alerts
What if I told you that Congressional leaders were maneuvering right now to enact a policy that literally benefits only the top 1% of Americans? If you were an "Occupy" protester, you'd probably tell me that's the only thing Congress ever does! Others know better, of course, but in one way it's absolutely true. Despite overwhelming opposition from conservatives, including NTU, I'm hearing lots of buzz that negotiators on the "minibus" appropriations bill are considering including a provision to raise conforming loan limits for the FHA (which insures mortgages) back up to an absurdly-high $729,750 (from an already-high $625,500 limit).
In a hilariously convenient coincidence, it turns out that the higher limit would quite literally only benefit roughly the top 1% of home purchasers. Not content to insure mortgages at a level that would cover 92% of all home purchases (like we did at the pre-bailout loan limit of $417,000), or even 97.8% of home purchases (which a $625,000 limit would cover), some in Congress are apparently insisting on allowing FHA to insure mortgages at a level that would cover nearly 99% of all home purchases. It would be funny if it wasn't so sad (and angering).
Federal involvement in the mortgage market has already cost taxpayers a staggering $169 billion, but that is apparently not enough of a disincentive for some Members of Congress. Not only would the higher conforming loan limit increase risk for taxpayers, it would stomp on a willing private mortgage insurance market and dramatically undermine the prospects for true housing policy and GSE reform in the future. We should be spending this time figuring out how to wind down Fannie and Freddie and the FHA's outsized role in housing finance.
The "99% movement" protesters are wrong as it relates to income taxes, where the top 1% of earners paid nearly 37% of all income taxes in 2009. When you broaden the scope to all federal taxes (including corporate, social insurance, and excise taxes), the story is basically the same: the top 1% shouldered 28% of the burden in 2007. Our tax code is not, by and large, rigged for rich folks. But if the conforming loan limit reports are true, we're about to hand the gift of federal backing to the richest 1% of homeowners in the country in a shameful and completely unnecessary act.0 Comments | Post a Comment | Sign up for NTU Action Alerts
The results are in, and the winner is…well, that is complicated. Voters went to the polls across the country yesterday and NTU tracked the results of statewide and local ballot measures in 10 states. While the headlines are focused on the defeat of Issue 2 in Ohio, there were more positives than negatives, and the 2011 elections on the balance show a continued voter preference for lower taxes and less government.
All the results from last night should also be colored by the enormity of the victory in Colorado last week. Proposition 103 in Colorado was the only statewide tax increase in the country and it went down by a 2-1 margin. The policy choices expressed by voters last night do not necessarily reflect a tax preference. That preference is still very much clear by looking at the number of local tax hikes which went down in defeat.
In Ohio, Issue 2, the repeal referendum on the state’s collective bargaining reform law, went down handily. However, those same voters were even stronger in their antipathy for President Obama’s health care law, voting to protect health care freedom of choice by a 65%-35% margin. The early message from big government apologists seems to be that this vote was only symbolic. However, even as a symbol it shows continued strong disapproval of the federal health care law. When coupled with similar actions by states such as Missouri shows that federal overreach will continue to be an issue for voters going into 2012.
Additionally, a majority of the local tax and bonding measures went down in defeat. Thus, while voters said no to the state’s collective bargaining reform efforts, they sent an even stronger message that the solution to Ohio’s budget woes will not be found in tax hikes and government mandates.
Another potential harbinger of things to come can be found in California. San Francisco residents voted for Proposition C, which would save the city over $1 billion in public employee pension costs. While voters rejected a more expansive proposal, Prop C shows a basic recognition by even the most liberal of cities that pension costs are quickly reaching unsustainable levels and reform, not higher taxes, are the answer. On the tax front, Bay Area residents also rejected a .5% sales tax increase to pay for public safety programs.
Washington State also provided a solid win for taxpayers. Voters approved I-1183 to privatize state liquor stores and sell off the related assets. In the process, I-1183 became the most expensive ballot campaign in the state’s history. They also voted to strengthen the budget stabilization fund. However, I-1125, which would ensure transportation revenue goes to transportation needs only, was narrowly defeated 49%-50%.
On the local level, results were also mixed. For instance, residents in Seattle approved a $32 million property tax increase, but rejected a $20 million vehicle fee increase. In San Juan County, voters narrowly decided to extend the real estate excise tax and decisively shot down a new solid waste disposal user fee.
While NTU is still in the process of compiling the results of the hundreds of elections last night a couple basic trends can be found. Voters did express a willingness to raise taxes if the measure delineated what the funds would be used for and was for a set period of time. However, overall, far more tax increases were defeated than passed. I think the big story is that despite the spin over Ohio's Issue 2 from proponents of big government, voters were in no mood to write blank checks to big-spending public officials.0 Comments | Post a Comment | Sign up for NTU Action Alerts
I often refer to the stimulus bill with ironic quotation marks, as in, “stimulus.” This is because I didn’t think the plan would work as intended. Also, the package was sold as being “temporary, timely, and targeted” but a lot of the spending failed to meet that criteria. More evidence of that continues to roll in.
This week it was reported that 45 percent of the Department of Energy’s $35 billion in stimulus funds remain unspent. So much for “timely” spending. (It appears that some Energy stimulus was “targeted” to Solyndra, but that didn’t really work out so well.)
A second article caught my eye this week highlighting yet another program that fails the ‘temporary” test. The “stimulus” bill included a $548 million state grant program to develop health information exchange systems. These systems would enable health care providers to share patient information with the goal of improving general health care and reducing duplication of prescriptions and tests. But now many states are wondering how they will continue to fund the program once the “stimulus” grant expires in 2015.
Unless more federal manna flows down from on high, the states will have to charge somebody for use of the networks. But would providers be willing to pay? Julia Adler-Milstein, assistant professor at the school of information and the school of public health at the University of Michigan, has conducted evaluations of the program in several states. She told the Center for Public Integrity, “We’re not really clear who health information exchanges are creating value for. Lots think it’s the patients, but at the end of the day I think we haven’t convinced anyone that health information exchanges are creating value for anyone.”
That’s “stimulus” for you.1 Comments | Post a Comment | Sign up for NTU Action Alerts
Is Congress Preparing to Soften the Debt Deal Trigger?
If you’ve paid attention to Washington long enough, you’ve likely learned you can never stop paying attention. Let down your guard, even for a split second, and Congress is sure to find some way to avoid the hard choices required to reduce our debt.
The bipartisan deal to raise the debt limit was written to be foolproof. If the deficit “supercommittee” could not agree with $1.2 trillion in cuts, the authors of the deal built in a trigger that would make automatic cuts to Medicare and defense spending. The idea was to make the cuts so politically toxic as to force the supercommittee to act.
Well, they were half right. The cuts are toxic; but rather than forcing the supercommittee’s hand, they’re encouraging some lawmakers to try and void the trigger altogether.
Lawmakers from both parties have warned what a disaster the automatic spending cuts would be if the deficit-slashing supercommittee fails to reach a deal in just under three weeks.
But the reality is that the so-called trigger might not carry the live round everyone fears.
A growing number of lawmakers are already talking about reversing the automatic spending cuts to defense and domestic programs that would go into effect if the supercommittee doesn’t find at least $1.2 trillion in deficit cuts by Nov. 23.
Sens. John McCain (R-Ariz.) and Lindsey Graham (R-S.C.) confirmed Thursday that they’re working on “alternative” legislation that would scale back the size of cuts that can be made to the Pentagon. On the other side of the political spectrum, liberals are talking about rolling back automatic cuts to domestic programs.
Thomas Jefferson once said, “the price of freedom is eternal vigilance.” So keep your eyes peeled, your ear to the ground, and your finger in the wind, because Washington needs to know that we’re watching, and we won’t accept anything less than the already modest deficit reductions that were promised.2 Comments | Post a Comment | Sign up for NTU Action Alerts
Over the past several decades, the federal government and several state governments have been raising tobacco tax. The stated goal is to reduce demand for cigarettes and tobacco-related products. But everyone knows (or should know!) that governments are just as addicted to tax receipts as smokers are to tobacco. The ultimate goal of the hikes has been to raise revenues. And since cigarettes are politically incorrect, they provide a convenient cover for enacting higher taxes.
But then governments started noticing an unintended consequence of the higher tax rates: smugglers realized that they could make a profit purchasing cigarettes in low-tax states and shipping them to high-tax states for re-sale. So then taxpayers had to spend more on anti-smuggling enforcement efforts in order to “save” the loss of taxpayer receipts.
Now there is a new twist to the anti-tobacco effort. Connecticut is the recipient of a $10 million federal grant to pay certain Medicaid-eligible people not to smoke and to attend anti-smoking classes. And all of this will… you guessed it… “save taxpayer dollars.” Or will it?
If we have fewer smokers, there will be fewer tax receipts, which is probably part of the reason why most state governments never spent much on anti-tobacco from the billions in payments they received from tobacco companies. The massive payments, agreed to in the resolution of the states’ lawsuit against “big tobacco,” were ostensibly to compensate states for smoking-related health care expenses. Yet, states ended up using the bulk of those funds to shore up their general budgets. And as my former colleague Kristina Rasmussen pointed out, tobacco tax receipts are often tied to specific spending programs and state and governments will have to look to other taxes to fill in the gap as tobacco use declines.
The next point is perhaps morbid but must be considered in light of the claims that paying people not to smoke will save money. Okay, so if people stop smoking, fewer Medicaid dollars will be spent on smoking-related health treatment. That is logical. But it does not necessarily follow that Medicaid will save money overall: absent cigarettes, individuals will live longer and could potentially end up consuming more health care services than they would have received if smoking had cut their lives short.
I am very skeptical of claims of these types of efforts to “save” money, especially when you have governments so dependent on the revenue streams. But I do know for sure that we could save $10 million by rescinding this grant to pay people not to smoke.0 Comments | Post a Comment | Sign up for NTU Action Alerts