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What's the Lame Duck Done So Far?
Posted By:  - 11/22/10

So, Congress was in a Lame Duck session last week.  What did they accomplish?  The following four bills passed Congress and were sent to the President for his signature, according to the Library of Congress.

  • S. 3774, A bill to extend the deadline for Social Services Block Grant expenditures of supplemental funds appropriated following disasters occurring in 2008.
  • S. 3567, A bill to designate the facility of the United States Postal Service located at 100 Broadway in Lynbrook, New York, as the "Navy Corpsman Jeffrey L. Wiener Post Office Building".
  • S. 1367, International Adoption Simplification Act.
  • S.J. Res. 40, A joint resolution appointing the day for the convening of the first session of the One Hundred Twelfth Congress.

Can't wait for the after-Thanksgiving break flurry of activity.

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Election 2010: What a night
Posted By:  - 11/03/10

Oh what a night!


As of this morning, Republicans won 60 additional seats and control of the U.S. House of Representatives. Also, Republicans expanded the size of their caucus by six in the Senate. These two changes that will have serious implications for a host of economic policies at the national level, including energy production, taxes, entitlements, and the debt. My colleague Jordan Forbes will have more to say about the federal results soon.


But for all of the dramatic change at the federal level, what happened in Congress pales in comparison to the changes that voters made at the state level. Republicans picked up nine governorships, including several in the economically important Midwestern states, and won control of 18 state legislative bodies, including chambers in North Carolina and Alabama; today marks the first time since Reconstruction the GOP has controlled those chambers. The larger number of fiscal conservatives in state legislative chambers will have a significant impact on the next round of budget negotiations, when states will have to face no easy choices to balance the budget in the midst of uncertain economic times.


Voters also weighed in on hundreds of state and local ballot measures that affect tax and budget policies. There were several setbacks for taxpayers yesterday. It appears as though voters rejected efforts to reduce taxes income and property taxes in Colorado and sales taxes in Massachusetts. Additionally, California passed a measure that would allow the legislature to enact a budget with a simple majority vote, which will likely open the door to more tax hikes. Unfortunately, Californians also rejected an effort to repeal a costly cap-and-trade emissions program in the state. However, at the same time, Californians voted to require supermajority votes on fees and to prevent the state from raiding funds for local government.


But taxpayers did score several important victories. Despite rejecting a broad reduction in the sales tax, Massachusetts approved a cut in the sales tax on alcoholic beverages. Washington voters resoundingly rejected an effort to enact a new state income tax and approved a measure rolling back a tax on soda, candy, and bottled water. Washingtonians also voted for a measure to require a supermajority in the legislature for any tax increase. Missourians voted overwhelmingly to require votes on local earnings taxes. Meanwhile, Indiana approved a measure to enshrine caps on property tax increases in the state’s constitution.


Elsewhere, Arizona and Oklahoma approved measures that projected the right to choose a health care plan from the individual insurance mandate in Obamacare. Several states, including Oklahoma, South Carolina, and Virginia approved measures to increase the size of their rainy day funds to weather bad economic times. Other states also approved measures that would provide property tax exemptions, impose term limits, and improve government accountability.


Of course, these are just a sample of the hundreds of measures that NTU is analyzing for its report showing how taxpayers fared at the ballot box yesterday. Stay tuned.

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Can California afford to Live like Ed Begley Jr.? Nope
Posted By:  - 11/02/10

The reality television show “Living with Ed” documents actor and environmentalist Ed Begley Jr.’s adventures and challenges in living a low-carbon emission, or so-called “green” lifestyle outside of Los Angeles. In each episode, we watch as Ed tries to grow his own drought-resistant crops or get good mileage out of his electric car. Though we may chuckle as Ed endeavors to practice what he preaches, his reality could become the reality for all of California unless Proposition 23 passes.

Proposition 23 on the statewide ballot would suspend AB 32, a 2006 law that requires a 30% reduction in carbon emissions by 2020, until unemployment falls to 5.5 percent for four consecutive quarters. AB 32 achieves the emissions reductions through new taxes and regulations on cars, trucks, appliances, and farming. Additionally, AB 32 mandates electricity from renewable sources like wind and solar power.

The bill’s supporters said it would create jobs, so-called “green jobs,” in California, but a study a the Pacific Research Institute, a San Francisco-based think tank, predicts 150,000 lost jobs by 2012 and another 1.3 million by 2020. Additionally, a Sacramento State University study shows that AB 32 will actually increase a family’s cost of living nearly $4,000, boost the regulatory burden on an average small business by nearly $50,000. All of this to create a “green” lifestyle for all of California.

These figures are not idle speculation. European countries that have tried programs like AB 32 have actually experienced job losses. Gabriel Calzada, a Spanish economist and lead author of a study detailing the economic costs of Spain’s green experiment, found that the Spanish economy lost a net 2.2 jobs for every “green job” the mandates created. And most of the green jobs (9 out of 10) created from renewable energy mandates were temporary because they were installation jobs. As a result of the mandates, Spanish companies like Acerinox, a steel maker, exported manufacturing jobs to South Africa and Kentucky. California companies will likely do the same.

California simply cannot afford this. The American Legislative Exchange Council already ranks California 46th out of 50 on its Economic Outlook Rank. The state ranks so poorly due to its high state and local tax burden, its income tax progressivity, size of its public workforce, and public employee compensation. For example, the state boasts one of the highest marginal income tax rates on high-income earners, currently at 10.55 percent, and the highest marginal corporate income tax rate in the West, at 8.84 percent. However, all of this translates into a weaker economic output. Adding to the tax burden by allowing AB 32 to take effect would only exacerbate the state’s bad economic problems.

No other state has tried to follow California’ lead in creating it’s own cap and trade program, and for good reason. Even under the best economic conditions, the impacts of AB 32 on the state would be terribly harmful. But at a time when the state’s unemployment rate is in excess of 12 percent and the state is broke by $20 billion, allowing AB 32 to take affect would be downright devastating to Californians. Though we may laugh and envy some aspects of Ed Bagley’s lifestyle, California simply cannot afford it.

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NTU Joins with Liberal Group to Identify $600 Billion in Waste
Posted By: Andrew Moylan - 10/28/10

Today, NTU joined with the liberal group U.S. PIRG to release a report called "Toward Common Ground: Bridging the Political Divide to Reduce Spending." This report debuts a list of $600 billion worth of specific federal spending reductions. With all the talk about debt and deficits, we saw an opportunity to put together a true left-right coalition in order to begin the conversation about the difficult choices we’ll have to make as a nation. We thought it would be useful to reach across the ideological divide to identify specific items that we could cut from the federal budget without reducing the quality of government services or neglecting the government's basic commitments.

The U.S. PIRG and NTU study identifies 30 specific, actionable items to cut in federal spending, including:    

  • $62 billion in savings by eliminating wasteful subsidies to farmers and large corporations.
  • $354 billion in savings from reforming inefficient contract and acquisition procedures.
  • $77 billion in savings by improving execution of existing government programs as well as eliminating unneeded programs.
  • $108 billion in savings from ending low-priority or unnecessary weapons systems, along with rightsizing other programs.

While we're under no illusions that every group or individual on the left and right will agree with our list, we think that it can serve as something of a consensus document from which Congress and the President's Fiscal Commission can work. Simply stated, we can't continue to kick the can down the road on reducing the size of the federal government.  In order to head off a debt crisis like that facing Greece today, we need to begin scaling back our unsustainable spending habits.  This list can help to do that without starting a political food fight.

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Taxpayers win in court
Posted By:  - 10/27/10

Taxpayers have won an important first-round victory in the battle against taxing Internet sales.


Late Monday, a U.S. district court judge in Seattle ruled that the First Amendment of the U.S. Constitution forbids state tax authorities from knowing what goods customers purchase from online retailers. At issue was an effort by North Carolina to require online retailers to report the names, addresses, and purchases of their customers so that they could collect sales taxes from the transactions. Amazon, which filed the lawsuit challenging the effort, successfully argued that such “data demands would make customers think twice about buying controversial products” when they purchase books, movies, and music.


Across the country, states starving for tax revenue, yet unwilling to reduce spending, have gone after out-of-state online retailers. The states claim that the out-of-state retailers have an obligation to collect sales taxes on purchases with their citizens. But not according to a 1992 U.S. Supreme Court case, which says that retailers are not required to collect a state’s sales tax unless they have a physical presence within the state.


Despite the Supreme Court’s ruling, several states, namely New York, Colorado, and North Carolina, have zealously sought to collect taxes from out-of-state online retailers through creative schemes commonly known as “Amazon laws.” Basically, these laws require out-of-state retailers to collect taxes because they have in-state affiliates, which are websites that link to the retailers. Other variations of Amazon laws require the retailers to report purchases to the state or send notices to customers that they owe sales tax. Online retailers have shut down their affiliates programs rather than meet these burdensome requirements. What these Amazon laws have done is cost the state revenues because without the affiliates, there is no business activity for the states to tax.


This case is an important victory for taxpayers. Not only does it protect Internet commerce from tax revenue-hungry states, but it also ensures the right to privacy in online shopping. But it is only a first step. Appeals will likely follow. There are also other states considering similar laws. Stay tuned. Rest assured, NTU will be watching these cases closely.

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New governors with new plans for economic growth?
Posted By:  - 10/22/10

Today's New York Times features a story entitled, "Storming Statehouses With Plans for Growth," which details some of the plans that many of the Democrat and Republican candidates for governor have to spur job creation and economic growth.

As Damien Cave writes, "Democrats and Republicans in the 37 races for governor this year have published economic plans that for all their differences share what experts describe as a significant shift: public investment, government support and education are all likely to become less one-size-fits-all, and more focused on the dorm-room dreams of budding entrepreneurs." He goes on to write, "And government, many future governors now say, must become more agile and responsive to business. Corporate regulations would be eased or eliminated by candidates from both parties in California, Pennsylvania and several other states, while plans to simply create connections among employers, state government, other nations, venture capitalists and universities are being promoted by candidates across the country."

Among the proposals are tax breaks for startups and job creation, replacing economic development corporations with non-profit groups run by business executives, locating enterprise zones near universities to link entrepreneurs with research talent pools, and applying business concepts to education. There are also proposals to streamline government to make it more nimble. On balance, many of these proposals look to make government more equipped to work with businesses in a 21st-century economy.

Overall, I think these plans are welcome news. Governors look as though they realize that the old way of doing business and creating jobs, namely more government spending, has not worked. It also appears as if the governors are seriously looking at tax reforms to reduce the crippling tax burden. However, many of these proposals are targeted tax credits and incentives for certain industries to site businesses in the states. These narrowly-targeted policies have had mixed results. Given the state of the states, what is needed most is broad-based, bold reforms to taxes and spending. What would work best is what governors like Rick Perry of Texas and Chris Christie of New Jersey have proposed, including reductions in state spending, caps on taxes, and more manageable and accountable government.

While these proposals are good start, they are only a start. A lot more will be needed to turn the states around in the worst economic downturn in generations.

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The Myth of TARP's "Profit"
Posted By: Andrew Moylan - 10/21/10

You've probably heard about the recent end of the Troubled Asset Relief Program (better known as TARP) ((also known as the outrageously outrageous $700 billion Wall Street Bailout)) (((also known as the "reelection killer"))).  Supporters of the program have been crowing about the fact that it appears to have made money, about $25 billion worth over two years.  So, all is peachy, right?  I mean, we totally saved the economy from complete and total armageddon that would have resulted in approximately 9.8 BILLION people losing their jobs and an unemployment rate of 6,728% and made a PROFIT for our trouble.

Allow me to burst your bubble. That $25 billion profit is a myth, a fiction of Washington accounting (like so many other numbers we hear), and here's why: because the banks that got bailed out through TARP shuffled all of their bad assets over to Fannie Mae and Freddie Mac, which got their own separate bailout.  So, really, it should be no surprise that they're relatively healthy.  They cut out the cancer and passed it right along to Fannie and Freddie.  The banks have issues with the current foreclosure mess, but the worst loans are no longer their problem, they're taxpayers' problem.

So, just how big is that problem?  Well, big.  Really big.  Their regulator is reporting that they could need another $215 billion worth of cash infusions over the next three years alone just to stay afloat.  That's on top of the $148 billion we've already shelled out for them.  That means that the top-line cost could rise as high as $363 billion.  When you subtract the $25 billion profit from TARP from that number, our bailout of Wall Street from their mortgage mess through Fannie/Freddie could cost $338 billion.

That's what a REAL accounting of the bailout would look like.  Sure, TARP doesn't look so bad on paper, but that's because we just had Fannie/Freddie buy up most of their toxic assets.  It's not unlike what happened with General Motors in their bankruptcy restructuring.  They only exist because bankruptcy allowed them to cut out much of their cancer and leave it in a holding company that's worth very little and is separate from GM.

We may have made a profit on TARP, but we did NOT make a profit on the Wall Street bailout as a whole and anyone who suggests we did isn't telling you the truth.

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Open Season in San Francisco
Posted By: Richard Lipman - 09/29/10

Is it tourist season in San Francisco? With the way that the city is poised to take aim at out-of-town residents this November, it seems more like hunting season. San Franciscans will vote on two key ballot measures this election day, Measures J and K, that would mean hefty tax increases on hotels, online travel retailers, and out-of-towners if passed.


Measure J would raise the city’s hotel tax by 2%, as well as altering – to the detriment of consumers and travel companies – how the tax is assessed when rooms are booked online.


2% may not seem like a lot, but keep in mind that San Francisco’s hotel tax currently stands at 14% - the hike would bring it to the highest in the nation.


The initiative has the support of public employees and unions, who say the measure could bring in up to $35 million for the city each year. Democratic mayor Gavin Newsom, however, opposes “J”.


At a luncheon in July, he said the tax was “exactly what New York did wrong… They went forward with so many taxes that they basically stifled imagination, creativity, innovation and entrepreneurship. … The last thing San Francisco wants to do is to get international attention for increasing its hotel tax.”


When even Gavin Newsom is marching along to the anti-tax drum, supporters of Measure J have to wonder what they’ve gotten themselves into. Already a number of organizations have expressed doubts about whether they will hold their already-planned events in the city, pending the outcome of the referendum.


The San Francisco Chamber of Commerce cites, as potential consequences of the legislation, a decrease in tourism, a rise in unemployment among hotel workers, and decreased revenue for the city from money that visitors would otherwise spend on restaurants, souvenirs and other discretionary items.


Measure K, by contrast, would not increase the hotel tax rate – but would increase the amount that travelers who make their reservations through online groups like Expedia or Travelocity pay taxes on. The city bills the measure as closing a “loophole” in the current law, and expect it to generate an additional $6 million a year.


We beg to differ. Measure K, though subtle, is still a tax increase – a tax increase that will hit out-of-city residents, unfairly depending on tourists and businessmen to fund the $522 million-deficit the city has spent itself into.


That seems kind of like ordering the most expensive bottle of wine and sticking your friends with the bill.


Tourist season, indeed.

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Water Protection, Textile Tariffs Featured in Latest Taxpayer’s Tab
Posted By: Dan Barrett - 09/28/10

Tab Insert

The latest Taxpayer’s Tab-- the NTU Foundation’s up-to-the-minute BillTally research newsletter -- brings you four more Congressional bills, all of which might affect you if they were enacted. One bill would mandate private insurers to expand breast cancer treatments. That bill was our Most Friended bill of the week with 252 House cosponsors. If you follow the NTUF Twitter feed, you would know the most expensive bill of the week would take new tax dollars and create a trust fund for water research and development.

Another bill would institute another tax on clothing importers, where the money would research US textile competitiveness. Is a friend looking to buy some Underarmor? Forward the Taxpayer’s Tab so they’ll know what Congress plans to tailor for us all.

The bills covered in the newest Taxpayer’s Tab include:

  • HR 3202, Water Protection and Reinvestment Act
  • HR 6134, To provide for a 10 percent reduction in pay for Members of Congress; to make Federal civilian employees subject to a period of mandatory unpaid leave, and to reduce appropriations for salaries and expenses for offices of the legislative branch, during fiscal year 2011; and for other purposes
  • HR 1691/S 688, Breast Cancer Patient Protection Act
  • S 1439/HR 3168, United States Optimal Use of Trade to Develop Outerwear and Outdoor Recreation (OUTDOOR) Act

With 34 days till Election Day 2010, are you aware of Congress’ potential spending agenda? If not, subscribe to the Tab and arm yourself with the best information from THE source of Congressional research: NTU Foundation.

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Think like a Stakeholder, not like a Dependent A New Take on Unemployment Insurance
Posted By:  - 09/22/10

Paying people not to work will ease unemployment.

There is something wrong with this statement. Nevertheless, when it comes down to it this is exactly the rationale some have regarding the current state-sponsored unemployment insurance (UI) systems. They are programs that attempt to help people through difficult times after involuntary layoffs. The hope is to get people on their feet, by providing them an income as they look for a new and acceptable job. No argument there.  However, study after study (even those conducted by economists in the Obama Administration) have shown that the current UI system actually prolongs unemployment, stalls economic growth, and discourages individual savings.

In an attempt to mitigate these problems, and preserve an unemployment insurance program, the Oregon-based Cascade Institute has proposed an interesting solution. It calls for a hybrid program consisting of tax-free Individual Asset Accounts (IAA) and a small federal common-pool fund. The idea is to make workers stakeholders in their own plans and use current tax dollars to increase private wealth.

Currently, the Social Security Act compels the states to operate Unemployment Insurance (UI) systems. The plans are predominantly run by the states and funded through payroll taxes paid by the employer based on their layoff history. Those who layoff more, pay a higher rate.

Overall, there are three problems in the current UI system worth noting.

First, studies show that unemployed workers who receive benefits take more than twice the time to find a job than those who are not eligible for benefits. Why? Alan Reynolds from the Cato Institute says it best:  “When the government [in some cases] pays people 50 or 60 percent of their previous wage to stay home for a year or more, many of them do just that.” It’s the classic “when you subsidize something, you get more of it” routine.  The promise of benefits discourages the unemployed from looking harder for new work.  Reynolds cites a survey conducted by Bruce Meyers of the University of Chicago showing that the probability of a person leaving unemployment rises dramatically just prior to when benefits run out. For example, if benefits are extended to 79 weeks – as they were in the “stimulus” bill – there is a higher likelihood that many people will not accept work until the 76th or 78th week.

Second, the supposed economic benefits of unemployment insurance are balderdash.  Spending money over a long period of time to sustain a person who is not working is not an investment in economic growth.  As a matter of fact, research done by economist Sylvain Leduc shows that government spending produces a lower fiscal multiplier than do tax cuts. In other words, a dollar of added federal debt added as a result of increased spending added far less than a dollar to GDP.

Third, safety nets like UI discourage personal savings and responsibility.  This occurs under the assumption the government will protect people in the event of job loss. Saving helps the economy by generating a greater supply of loanable funds, thus lowering interest rates and stimulating capital investments.

The Cascade Policy Institute has an interesting solution to the current problems of the UI system, which they hope to pilot in Oregon. Their plan calls for a hybrid system that features Individual Asset Accounts (IAA) and a small common-pool fund. Employers would still pay state payroll taxes but the funds would be put into the employee’s IAA, while the federal payroll tax would fund the common fund. The tax rate for employers to fund the IAA’s would be 1.6 percent of wages, while the federal common fund rate would remain at its current 0.8 percent of the first $7,000 of wages.  This common fund would be used to subsidize qualified low balance accounts for a limited time. 

The IAA would accumulate tax free for life and could be used at the discretion of each worker for unemployment insurance. At retirement, the accounts balance would be deposited into the worker’s IRA, turned into an annuity, given as a lump sum transfer, or passed onto heirs.

This innovative plan would encourage individuals to think like stakeholders, since they are the ones who own the account. In the event of layoff, individuals could draw from their account. At the same time they would be more cost conscious and encouraged to step up their job search efforts. In addition, the savings being built up with the IAA’s would have a positive effect on the economy by providing more capital for businesses to expand. And lastly, many who currently pay into the Oregon UI system but are not eligible for benefits (either because they have not worked the required minimum 500 hours or have not earned sufficient wages) would now be able to participate in the system.

At a time when the country faces high unemployment rates all options should be on the table for policymakers. Evidence shows that the current UI system actually prolongs unemployment and economic recovery. As such, reforms to this system should be front and center on the minds of those in state governments. IAA’s are a good start.  

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