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EconomyTax Hikes Go Back to the Future Today, the Senate Finance Committee is marking up their transportation bill with an eye toward adding billions in tax increases to cover the overspending in the bill. More spending, more tax hikes to pay for it. Stop me if you've heard this before. But there are two proposals in particular that gave me a little bit of policy deja vu. First, the so-called "Chairman's mark" includes a $3 billion retroactive tax increase targeting the "carrying forward" of credits claimed back in 2009. You might remember 2009 as the year before the year before this year. The halcyon days when we passed a "stimulus" bill that was going to help our economy boom by 2012. The optimistic times when we could totally afford a trillion-dollar government-run health care program and our debt was "only" $10-11 trillion (as opposed to $15 trillion and counting today). Some on the Senate Finance Committee apparently would like to relitigate tax policy from that wonderful era in American history and enact a retroactive tax hike. Now, it should be noted that the two credits they're targeting (the alternative fuel mixture credit and the cellulosic biofuel producer credit) are not ideal tax policies by any stretch of the imagination. Particularly the alternative fuel credit, given that it's "refundable" and thus acts like government spending rather than simple tax reduction. A smart tax code wouldn't include either of these policies but would levy low, consistent taxes across the board for all types of fuels and producers. But enacting retroactive tax increases is a much more egregious violation of principles of sound tax policy than either of those dumb credits. The second effort, a proposed amendment to the Chairman's mark from Senator Robert Menendez (D-NJ), would target the oil and gas industry for punitive tax treatment by eliminating provisions like the Section 199 manufacturer's deduction or the "dual capacity" credit for them alone. If we've written it once, we've written it a hundred times: singling out oil and gas companies for higher taxes is bad tax policy and it's bad energy policy. Thankfully, the Congress has thus far largely agreed with us as the dozens of attempts in recent years to impose Menendez-like tax increases have all failed at one point in the process or another. The Senate Finance Committee will be taking up these issues this afternoon and we hope they focus their efforts on reducing wasteful spending and not on retroactive tax hikes or tired attempts to punish an unloved industry. 0 Comments | Post a Comment | Sign up for NTU Action Alerts
A Fix for a Growing TV Debacle Recently, I wrote about a brewing disaster in the world of television called retransmission consent in a post called "Government screws up your TV." Basically, disputes between television content providers (e.g. ABC) and television service providers (e.g. DirecTV) that play out on a heavily-tilted playing field threaten to cause blackouts for consumers that are entirely avoidable if only we had a policy structure that made sense. Well, the issue is rearing its ugly head again as a dispute between DirecTV and Sunbeam Television has drawn the interest of Senator John Kerry (D-MA), a legislator who has long had his eye on a legislative "fix" to the problem that would empower bureaucrats and do little to solve the underlying problem. (I'm sure this has nothing to do with the fact that a prolonged blackout threatens to keep many Boston-area viewers from being able to watch their Patriots play in the upcoming Super Bowl) In a phrase that I utter approximately once a month, Senator Jim DeMint (R-SC) to the rescue! In conjunction with Representative Steve Scalise (R-LA), he has introduced a great bill called the "Next Generation Television Marketplace Act." This bill takes exactly the kind of approach that I counseled in my post:
Since I'm sure Jim DeMint reads everything I write and immediately drafts legislation based on my wisdom, the bill he drafted looks pretty great at first glance. It would do a few major things: repeal "must carry" provisions that force service providers to carry content whether they want to or not, repeal retransmission consent and compulsory license provisions in order to truly level the playing field between the two negotiators, and repeal ownership limitations that serve little purpose for consumers. By contrast, the approach Kerry had been floating would have inserted the FCC into the middle of these negotiations, with all of the politics and delays that come with them. Though I'm still perusing some of the details, this looks to be a very promising bill and I hope that members from all parts of the political spectrum can come together to support it.
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What Wasn't in the State of the Union? So President Obama's 2012 State of the Union is over now and everybody's analyzing the details of what he said (including our NTU Foundation, where researchers are working on figuring out exactly how much his proposals would cost for taxpayers). For someone who claims to be laser-focused on economic growth and job creation, we couldn't help but notice that he left a few things out that SHOULD have been in the speech. For example... The Keystone XL pipeline The President conveniently neglected to mention that his Administration just last week denied a permit to build the Keystone XL pipeline, a project to safely deliver Canadian energy resources to the American market. Construction of Keystone XL could have generated as many as 20,000 jobs while bringing much-needed energy to a hungry domestic market that has faced obstacle after obstacle from this Administration. We've been calling for its approval since last summer, but unfortunately for taxpayers and consumers, the President ignored those calls and put the kibosh on the project. Unlocking valuable spectrum Cost-free to taxpayers, beneficial in reducing our staggering deficit, and absolutely vital to the continued growth and innovation of technology and the internet. What no-brainer policy am I talking about? Competitive spectrum auctions. Did the President talk about it last night? Of course not! There have been rumblings from both sides of Capitol Hill and both sides of the aisle about spectrum for some time, but some Presidential leadership could work wonders in ushering a win-win policy to completion. Allowing businesses to...you know, conduct their business This one's sort of a personal pet-peeve, but of course the President failed to mention the meddling in which his Administration has engaged/will engage in private business operations. Things like the AT&T - T-Mobile merger (which NTU supported) that his Justice Department and FCC squashed last month. Or the ongoing FTC antitrust investigation into Google, a company which charges its users exactly $0 to access its search engine and other services. Or the ongoing process of the Express Scripts - Medco Health Solutions merger. Keeping the federal government out of the way, by and large, is the best way to foster economic growth, but this Administration has time and again shown a tendency towards populist intervention that is unhelpful to say the least. An energy strategy not centered on subsidies The President did talk about energy last night, and some of it was commendable. He talked about opening up some more areas under federal control to energy exploration, though I'll await further details before judging. But most of what he said focues on how we should be showering even MORE subsidies on energy technologies that are to the liking of Barack Obama (namely: solar, wind, anything vaguely "green" or "renewable"). And of course he did it while taking swipes at the "Big Evil Oil Companies" he so frequently derides. Funny side note: the biggest of the oil companies that are the focus on Obama's vitriol was just passed as the most valuable company in the U.S. by Apple. The wife of the late Steve Jobs sat beside the First Lady during the speech and got a specific shout-out (a positive one!). I guess he doesn't mind that they're "the 1%" of companies and that they're sitting on tens of billions in largely idle cash reserves, another practice he has criticized elsewhere. Any serious discussion of bipartisan spending reductions The President made some vague remarks about "working together" in a bipartisan fashion, along with some passing comments about reducing waste in the federal budget. But he didn't come anywhere close to making it a serious and substantive part of his speech. Too bad. We already worked with the liberal U.S. Public Interest Research Group to give him a $1 trillion head start on spending cuts that left and right could agree upon and stand ready to assist him. Let's just say I'm not eagerly awaiting his call. What else should the President have covered if he were serious about economic growth and job creation? 1 Comments | Post a Comment | Sign up for NTU Action Alerts
College Football Playoff Act of 2011 - Taxpayer's Tab Supplement This week's Taxpayer's Tab focused on H.R. 3638, Act for the 99%, which left us with some additional material that we're highlighting here. This week's "Wildcard Bill" is H.R. 3696, the College Football Playoff Act of 2011. The Bowl Championship Series is a collection of five college football bowl games for NCAA Division I Football Bowl Subdivision (FBS) programs with the top two teams playing in a championship game. The goal of the BCS, which began with the 1998 season, is to pit the two best FBS teams against each other in an attempt to avoid a split national championship. The selection of the top two teams is based on a combination of computer algorithms and polls. The winner of the championship game is recognized by the conferences that participate in the BCS as the BCS National Champion. Despite tweaks to the system over the years, the BCS has not been without controversy. That controversy – the failure to produce a champion via a true playoff system – has lead Congressman Joe Barton (R-TX) to introduce H.R. 3696, College Football Playoff Act of 2011. H.R. 3696 would make it unlawful to promote, market, or advertise any FBS game as a championship game unless the game is the result of a post-season, single elimination system. The same prohibition would apply to any merchandising associated with a championship game. The Federal Trade Commission would be charged with enforcing the legislation under its powers dealing unfair or deceptive advertising. The College Football Playoff Act is a regulatory measure and does not authorize any new spending. However, it is unclear how the act would affect FTC spending or how federal education spending might be affected by a change in college sports programs. 0 Comments | Post a Comment | Sign up for NTU Action Alerts
Competition Matters From Philly.com:
U.S. Sen. Robert Casey (D., Pa.) has urged the chief executive officer of US Airways Group Inc. to rescind the airline's fare hike planned for flights between Philadelphia and Pittsburgh in early January, when only US Airways will fly between the two cities. I wonder if that's the standing room only price. 1 Comments | Post a Comment | Sign up for NTU Action Alerts
Help Fight Unfair Taxes Online 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
A&P, I-1183 & Economic Disruption I'm part way through Marc Levinson's book -- The Great A&P and the Struggle for Small Business in America -- which chronicles the company's rise from small tea dealer to retail giant with 16,000 stores and over $1 billion in sales. As A&P expanded during the 1920s and 1930s, small grocery stores -- like the one where my grandfather worked with his father, uncle, and brother -- closed. Even though the Diers Bros. Grocery in Gresham, Nebraska, survived the Depression and competition with chain stores, A&P was an economically disruptive force in hundreds of communities across the country. I thought of that economic disruption while reading about last week's passage of Initiative 1183 in Washington State. [Hat Tip to John Taylor of Tertium Quids for the article.] While it brought lower prices to consumers, A&P also forced less profitable and noncompetitive retailers out of business. As a result, there was a significant pushback against A&P and other chain retailers during the Depression. States tried to impose taxes based on the number of stores that a retailer operated. The federal government tried to outlaw the bulk purchasing discounts that large retailers received from manufacturers and tried to prevent retailers from selling items below cost as loss leaders. All of this was done in the name of preserving local jobs, even though it meant higher prices for consumers. Last week, Washington State voters decided to get their state out of the liquor business. I-1183, which was supported by Costco, succeeded just a year after a similar Costco-backed initiative failed at the polls. Much like A&P, I-1183 will be an economically disruptive force. Washington state residents can expect liquor prices to fall as state-run stores are closed and private retailers open shops. However, 900 or more state employees will lose their jobs. This, obviously, doesn’t sit well with those employees. From The Seattle Times: Tom Geiger, communication director for the union representing more than 700 workers in state-run liquor stores, said he thought the results raised questions about democracy itself. "If a private company decides to spend tens of millions of dollars to pass a new law, to buy an election, can they do it?" Geiger asked. The results in this case, he said, suggest they can. Putting aside the issue that Geiger seems to be ok with Costco spending millions and losing last year's ballot measure, his reaction is similar to the anti-chain advocates of the '30s: preserving jobs is more important than any of the benefits that customers might derive. Actually, I-1183 looks like a win-win for consumers and taxpayers. Consumers will see lower prices, and the state is expecting to collect $80 million more in revenue over the next six years. Bottom line: economic disruption can be good for consumers but bad for the status quo. Speaking of disrupting the status quo, I bought Levinson's book via the iTunes bookstore, and I'm reading it on my iPad. No printer. No wholesaler. No shipper. Just a little economic disruption and a lot of customer satisfaction. 0 Comments | Post a Comment | Sign up for NTU Action Alerts
Net Neutrality: A Solution in Search of a Problem
A solution in search of a problem. That’s the best way to describe the Net Neutrality regulations that the Senate is currently debating in anticipation of a vote later today. The Internet is not broken. Given the present state of our economy, it is one of the few sectors that could be described as such. In just the past decade the number of Internet users has soared from 513 million to more than 2.1 billion. It has not only fundamentally changed how individuals learn, communicate, and work, but has spawned an entire economic ecosystem, without which Google, Apple, Facebook, and thousands of other companies (and the jobs they created) would not exist. Moreover, all of this growth and innovation has occurred in large part without government regulation. Indeed, it is not a stretch to say that the Internet is the definitive free-market success story of our generation. Sadly, that hasn’t stopped Washington from wanting to gets its hands on it. And unlike Midas (or Steve Jobs, if we’re sticking to the theme), everything the government touches does not turn to gold. By way of background, Net Neutrality is the principle that Internet service providers should not block or slow-down consumer’s access to networks. The fear, as Sen. John Kerry (R-MA), explained on the Senate floor yesterday, is that “the people who control those access points [to the Internet] can start discriminating about who gets access at what speed . . . and begin to charge mo"re for [faster access].” Except there is little evidence that would ever happen. What supporters of Net Neutrality seem to forget is that consumers tend to not like getting shoddy, slow, or overpriced service. That’s one of the reasons internet service providers have been falling all over themselves to invest in the needed infrastructure. Consider the recent battle between Verizon Wireless and AT&T – each of which have spent millions of dollars in an ad war about the relative strength of their mobile “3G” networks. Consumers are increasingly savvy about these sorts of things and the free market has worked to keep them not only honest, but pushing for improvement. That’s one of the reasons that 93 percent of broadband subscribers are happy with their service – more than 10 times higher than the 9 percent approval rating Americans give Congress. But while Net Neutrality proponents rest their claims on unfounded predictions of some future harm, the threat of the FCC’s proposed regulations are very real. Implementing Net Neutrality regulations would require the FCC to have deep access to the business practices of the regulated internet service providers. This would include the ability to constantly monitor and draw data from network structures, content types, delivery modes and speed, applications, user preferences, and usage activity. This is not merely a privacy concern. It would equip the FCC with a vast body of information that could enable the implementation of a long-sought Internet taxation scheme. And with Democrats constantly on the search for more revenues to fund their spending habits, the temptation for Internet tax schemes grows. In searching for a solution to a phantom problem, the federal government threatens to create a very real one – stifling investment in our most promising source of economic growth. There is no market failure here that requires the government to regulate. Rather, the Internet is a free market success story that, if Net Neutrality regulations proceed, could end up with a very sad ending. 0 Comments | Post a Comment | Sign up for NTU Action Alerts
The 99% 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
William Niskanen, RIP I was very saddened to hear that William Niskanen, famed economist and Chairman of the Cato Institute, passed away yesterday at the age of 78. Bill was a giant in the limited-government movement and his contributions will live on for generations to come. His pioneering work in public choice economics, his turn as Chairman of President Reagan's Council of Economic Advisors, and his more recent role as a respected scholar at Cato all contributed mightily to shifts in economic thought and public perceptions of government. George Scoville wrote a nice piece at United Liberty documenting his lasting influence. Unfortunately, I can't claim to have known Bill terribly well myself. Back when I graduated from the University of Michigan, I moved to Washington and began an internship at the Cato Institute during his tenure as Chairman. I can only recall running into him once (at a large organization like Cato interns don't often have occasion to work with the top brass) when we shared an elevator ride to the top floor. In my mind, he seemed about 6'5" and looked every bit the part of the brainy economist (a sentiment apparently shared by Cato's Randal O'Toole, as Bill was apparently less than 6' tall) and I was too intimidated to say more than an awkward "Hello." The "his legacy will live on" stuff one hears after someone's death is often lionizing pablum, but not with Bill Niskanen. His work truly serves as the foundation upon which many of NTU's efforts are built. As but one specific example, our recent support of Representative Justin Amash's "Business Cycle Balanced Budget Amendment" is directly informed by Bill's work in identifying a better structure for fiscal limits. He will truly be missed, and the thoughts and prayers of NTU are with the Niskanen family and our friends at the Cato Institute for their loss. 0 Comments | Post a Comment | Sign up for NTU Action Alerts
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