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Milton Friedman: the Father of School Choice
Posted By: Michael Tasselmyer - 07/27/14

As NTUF gets ready to host our happy hour event in honor of Milton Friedman's 102nd birthday, many are gearing up to enjoy a fantastic opportunity to network, play Cards Against Liberty, and celebrate the legacy of the influential economist. However, one activity taking place at this event -- a school supply drive for Perry Street Preparatory Public Charter School -- happens to be inspired by Friedman's strong, life-long advocacy for school choice.

His philosophy centered on the idea that, while education is an incredibly valuable commodity, no one type of school setting is ideal (or even adequate) for every child. The ability for families to actually choose the type of schooling that they desire for their children leads to the highest quality K-12 education. To satisfy this end, families may elect to have the money that would otherwise be spent on their children's public education transferred to them so that they can select a school more tailored to their child's needs. Many areas around the country support such a model incorporating a variety of systems to transfer this money including: vouchers, educational savings accounts, tax-credit scholarships, and individual tax credits/deductions.

Perry Street Prep (PSP) is one such school that operates on this principle. Driven by a mission of empowering "students to be college-ready and to thrive in a global society," PSP strives to build relationships with families from a community of diverse learners. Founded in 1999 as the Hyde Leadership Public Charter School by Joseph W. Gauld, the school currently serves 953 students and supports an average class size of 15 students to every teacher. In addition, the school boasts a faculty that is certified as 100 percent HQT (Highly Qualified Teacher).

If you're in the Washington, D.C. area this week, come out on Tuesday, July 29 to the Laughing Man Tavern and celebrate one of the most influential economists of our time, and while you're at it, bring school supplies to help support this fantastic school.

Can't make it in person? Join NTUF online at our special #Milton102 page, where you can vote for your favorite tax reform proposal and be entered into a drawing for a $50 Visa gift card. Last year, we received input from taxpayers all over the country and we expect even more participation this time around. Whether you'd prefer a Flat Tax, a FairTax, or a modified version of our current system, let us know and be part of the nation-wide discussion among policy experts and grassroots members alike on this important issue!

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Paul Ryan Seeks to Strengthen Safety Net
Posted By: Dan Barrett - 07/25/14

Congressman Paul Ryan (R-WI), the Chairman of the House Committee on the Budget, recently spoke at the American Enterprise Institute about strengthening the safety net for disadvantaged and unemployed Americans.  Specifically, he reflected on the state of public benefits for the poor and how, through his proposal of an Opportunity Grant pilot program, welfare programs could be greatly improved.  The transcript and recorded video can be found here.

The Opportunity Grant would streamline existing sources of federal funding into one program.  States could then apply for that funding, and would be eligible for federal assistance so long as the anti-poverty initiatives receiving the support adhered to certain guidelines:

  1. Tax dollars must be spent on people in need, not infrastructure or other projects. 
  2. If benefits recipients are capable of working, they must do so. 
  3. There is to be a choice available for people to receive help, whether the alternatives are non-profit or for-profit groups (i.e. the state welfare agency must not be the only option that people can turn to).
  4. The results must be measured by a third party to ensure that progress is being made.

Overall, Congressman Ryan’s theme is to allow the federal government to support state programs, not to supplant their efforts.  Since the Great Society programs of the 1960s, many local efforts have become dependent on federal funds, thus becoming defacto federal operations. Congressman Ryan’s proposal is an attempt to address that by making federal welfare funding streams more efficient.

Another proposal from Congressman Ryan is to increase the Earned Income Tax Credit for childless workers.  This would be accomplished by lowering the minimum eligibility from 25 to 21 and to double the maximum credit to $1,005. To pay for this reform, he would not raise taxes but instead cut funding for less effective government programs, such as subsidies for renewable energy businesses.  His goal is to “stop programs that don’t work and support the programs that do”.

Congressman Ryan also addressed the need to expand access to education.  By bringing “more competition to the college cartels” through accreditation reform, the cost of schooling could be reduced as more educational institutions are available.

Criminal justice reform was also discussed at the event, particularly as it related to helping non-violent offenders contribute to the economy.  Instead of convicting those individuals for maximum sentences, Congressman Ryan proposed counseling and work programs in order to reduce recidivism and prepare them to enter the workforce.

He concluded by proposing to cut regulatory red tape by requiring that future regulations be approved by Congress.  If a regulation disproportionately affects low-income families, then the agency would be required to defend it on record for its actions.  In a bid to improve collaboration between government and taxpayers, Congressman Ryan invited anyone to comment on his proposals via an email to

After the Chairman spoke, there was a roundtable discussion which included Ron Haskins, Stuart Butler, and Bob Woodson.  Along with the Congressman, each expert emphasized different aspects of aiding Americans in poverty. Bob Woodson noted that the poor in America face different barriers to economic prosperity. “Both people on the left and the right have myths about the poor,” he said, and categorizing people only as victims does not help individuals overcome challenges posed by poverty.  The discussion conveyed the need to collaborate and to focus on solutions that are proven to be successful for lifting Americans out of financial difficulty.

The problem is not just academic.  According to the 2012 report by the U.S. Census Bureau, 48.5 million Americans live in poverty, 16 million of whom are children. Though the federal government spent over $1 trillion in 2012 on 80 (oftentimes overlapping) welfare programs, poverty continues to be a major economic issue. Legislators have always proposed reforms but many measures attempt to address the symptoms of poverty, rather than the root causes (education, health, and skills being major factors). On paper, much of what Congressman Ryan presented could help the disadvantaged, but they face significant political obstacles within the halls of Congress and the White House. By decreasing the costs of anti-poverty efforts while lowering the numbers of those actually in poverty, taxpayers and those in poverty both win. The question is whether or not Congress will choose to continue spending money on entrenched programs rather than take further risks on new ones.

Thanks to Ian Johnson for drafting this post.

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Florida’s 19th Special House Election: A Budgetary Guide
Posted By: Dan Barrett - 06/20/14

In what some are calling a quiet election, there’s still a lot to be said. Though the challenges of taking drug tests have largely been replaced with who can help create the most jobs in the next five months, before the next election for the same office, Florida residents are asking the same questions of candidates as they did in Florida’s other recent special House election: What will you do in Washington, D.C.? Especially in the wake of their last Congressman, Trey Radel, who resigned after being arrested for possession of cocaine.

In just a couple of short months, three front runners have emerged to battle for the 19th District’s seat: businessman Curt Clawson (R), businesswoman and former political activist April Freeman (D), and former health worker Ray Netherwood (L). Each candidate offers different general solutions to America’s fiscal ills but details have yet to come out about how each would actually change the federal budget. However, by using a methodology similar to National Taxpayers Union Foundation’s (NTUF) BillTally project, taxpayers can see where the candidates stand on at least some of the spending issues. For this brief study, we took direct quotes and campaign materials of candidates and matched them with budget and legislative data to see exactly what the differences and similarities are.

Similar to the New Jersey Special Senate and Florida’s 13th Special House elections, details were few and far between. Even with the campaigns releasing economic plans and platform summaries, we’re still left asking what will they do if elected as the House of Representative’s newest member?

Check out the entire line-by-line analysis of all three candidates. As with NTUF’s other BillTally and campaign studies, only changes in current spending are recorded (similar to the Congressional Budget Office). The reports do not include changes in revenues or costs outside the federal government. Below are summaries of each candidates’ proposals.

Curt Clawson (R) has proposed two (out of 12) quantifiable policies that NTUF was able to score. Combined, they would decrease annual spending by $395.8 billion. The largest budget-influencing item that he supports would cap federal expenditures at 19 percent of GDP, which would be implemented using the “Penny Plan,” which would cut spending by one percent each year as long as the budget is not balanced.

  • Block Grant Education Funds to States: Unknown
  • Continue Federal Flood Insurance Rates: Unknown
  • Create a Budget Cutting Committee: Unknown
  • Freeze Federal Employment: Unknown
  • Limit Federal Spending: $331.9 billion (savings)
  • Require Congressional Approval for Major Regulations: Unknown
  • Block Grant Medicaid Funds to States: Unknown
  • Eliminate Government Health Care Bureaucrats: Unknown
  • Protect Health Insurance Access for those with Pre-Existing Conditions: Unknown
  • Provide for Health Care Plans and Accounts: Unknown
  • Repeal the Patient Protection and Affordable Care Act: $63.9 billion
  • Restore Medicaid Advantage Funding: Unknown

April Freeman (D) has two (out of 12) policy items that NTUF could fiscally score. Together, they would increase spending by $20.203 billion each year for the next five years. Her largest quantifiable proposal would overhaul the immigration system.

  • Ensure Wage Equality: $3 million
  • Support Domestic Industries: Unknown
  • Support Teachers: Unknown
  • Ban Hydraulic Fracturing: Unknown
  • Expand Alternative Energy Sources: Unknown
  • Fully Fund Water Infrastructure Improvements: Unknown
  • Fight Human Trafficking: Unknown
  • Pass Immigration Reform: $20.2 billion
  • Protect Citizens’ Privacy: Unknown
  • Secure the Border: Unknown
  • Normalize Relations with Cuba: Unknown
  • Ensure Veterans’ Benefits: Unknown

Ray Netherwood (L) had one proposal that NTUF could identify. It would be to replace the current income-based tax system with a national sales tax, known as the Fair Tax. The measure would cut an average $19 billion in federal outlays for each of the next five years.

Normally, there would be some overlap between the candidates’ platforms. In the other Florida Special Election, the front runners supported increasing current spending by $180 million per year to delay a scheduled rate increase for the National Flood Insurance Program. That was not the case in this House race, although the three candidates were not asked similar questions when interviewed by the same source.

What does this mean for taxpayers and residents of the 19th District? It’s time for the campaigns to give Americans more details. While candidates are asking Floridians for their vote, taxpayers are asking for the roadmap of each candidate’s path to reach a better and expanding economy. As highlighted above and in the full report, the absence of budgetary facts and figures opens the possibility that all of the candidates could have much larger or smaller spending aspirations in mind. Clawson, Freeman, or Netherwood need only clarify their intentions with dollar figures to help complete this report and help educate Americans on important and pressing issues that we’re all facing.

Note: National Taxpayers Union Foundation is a 501(c)3 nonprofit organization. Our research efforts are intended only to educate Americans on how their tax dollars are being or will be spent by those in office, seeking office, or in appointed positions. For more information on NTUF go here.

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NTUF Celebrates National School Choice Week, Donates to Local Charter School
Posted By: Dan Barrett - 01/31/14

In celebrating National School Choice Week (NSCW), NTU Foundation and the Alexandria, Virginia chapter of Liberty on the Rocks brought together local taxpayers, educational freedom supporters, and students for a night of discussion, teaching, and skee ball. The Wednesday night event was one of over 5,500 events going on in every state that aimed to build awareness of local and national school choice efforts and educate citizens about the benefits and challenges of changing schools and school systems.

For this event, NTUF sponsored a “Skee Ball 4 School Choice” game where everyone played a game of skee ball and afterward joined in the larger group talks on what charter and voucher schools are, what everyone’s personal experience was and is in education, and where we see room for reform in educating students at all levels and ages. Congrats to Holly, Juli, & Demian for being the top three scorers in our friendly game of skee ball!

We also called on attendees to bring school supplies to help the efforts of Perry Street Prep, a DC charter school that serves low-income families and sometimes homeless students. The turnout for the students was overwhelming, collecting 3 boxes of assorted supplies like notebooks, composition books, crayons, and pens. Financial donations were also made to directly help the students and teachers at Perry Street Prep. If you would like to help NTUF’s and Liberty on the Rocks’ support, learn how to at their Giving page.

This was the first time that NTU’s education and research arm, NTUF, has hosted a NSCW event but it is not the only instance of our involvement in school choice. For the past three years, NTUF has organized in-person and online events for the Milton Friedman for Freedom Legacy Day, reaching hundreds of taxpayers across the country.

The Alexandria, Virginia chapter of Liberty on the Rocks has hosted school-choice events for three years, including NSCW and Milton Friedman for Freedom Legacy Day. The social group is dedicated to enhancing and expanding the cause of freedom. Check the group’s national site to see or start a chapter new you or go to the Alexandria chapter page to see when the next event will be held.

Thanks to everyone who donated or contributed to our school supply drive! Be on the look out for more chances to donate to Perry Street Prep and for more information on school choice.

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It’s National School Choice Week!
Posted By: Lee Schalk - 01/29/14

As we celebrate School Choice Week, we recognize that the key to economic prosperity and a brighter future is through empowering parents and giving children a first-rate education, not mindlessly throwing money at ineffective public school systems when they fail to deliver.

This past November, we saw yet another attempt at tax hikes for education; this time in Colorado. Fortunately, taxpayers rallied against the multi-billion dollar income tax hike and defeated Amendment 66 by a 3 to 1 margin. Coloradans—and millions of Americans—understand that our children deserve an approach to education that stresses increased accountability, more choice, additional parental control, and better use of our tax dollars.

Thanks to the hard work of school choice supporters, we’ve seen greater utilization of charter schools, tuition tax credits, and school vouchers. This has led to countless success stories in numerous cities and states. For the sake of America’s future, let’s keep that momentum going.

If you’re local to the DC area, please join us tonight at The Lighthorse in Alexandria, VA for a special School Choice Happy Hour. More info can be found HERE.

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Federal Student Loan Profits Rival Apple, Exxon Mobil
Posted By: Michael Tasselmyer - 11/26/13

It probably wouldn't come as a shock to most to learn that Exxon Mobil and Apple were two of the most profitable companies in the U.S. last year. With profits of $44.9 billion and $41.7 billion, respectively, the oil and electronics giants raked in quite a bit of revenue. But you may be surprised by which government program reported profits nearly as high: federal student loans.

USA Today reports that the U.S. government made $41.3 billion in student loan profits during the last fiscal year. That's down from the previous year's total, but the report comes just as student loan debt eclipses the $1 trillion mark.

In fact, Americans owe more in student loans than they do in credit card debt, as posted in the latest quarterly report from the New York Federal Reserve. And, according to the Congressional Budget Office, the popularity of these loans are unlikely to decrease: the non-partisan budget agency projects net loan volume (the total dollar amount offered in loans), net number of loans, and average loan amount to continue to increase every year for the next ten years.

The following two graphs (courtesy of strikingly illustrate the changing nature of credit card and student loan debt. Even as Americans' credit card balances shrink, student loan volume remains high:



As Americans take out less in credit card debt and more in student loans, the percentage of those loans that ultimately wind up as "delinquent" continues to grow, as well:


These trends have many economists and policy experts worried about the increasingly negative effect student loan debt is having on the U.S. economy's ongoing recovery. Said Federal Reserve Chairman Ben Bernanke recently: "[Student loan debt] is affecting, for example, the ability of many young people to buy a first home, affecting other purchasing decisions they might make, affecting obviously their overall financial condition... To the extent that there's a lot of student debt held by people who are not working, it's obviously yet another drag on recovery."

In July, Congress passed legislation that would tie student loan interest rates to financial markets, locking those rates in for the duration of the loan and capping the maximum applicable rate at various levels depending on the type of loan and level of study they will pay for. CBO estimated that would increase federal outlays by about $25 billion over the next five years.

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Lots of Ways to Learn About Congressional Spending
Posted By: Dan Barrett - 11/11/13

NTU Foundation is getting the word out about how Congress is planning to spend your tax dollars. For 20 years, the BillTally system has tracked every proposal introduced in the House and Senate to show taxpayers and legislators exactly what would happen if one, several, or all the active bills in Washington, D.C. were enacted. The first half of 2013 saw many bills to cut government spending but many more to increase expenditures on an annual basis. In our latest study, NTUF researchers found that Congress would grow public programs and efforts by $1.28 trillion per year. But, of course, that's not the whole story and is just one of the several findings that NTUF's research has brought to light.

Elected officials in each Chamber of Congress have laid out many different paths for the country's fiscal future. Besides consulting the line-by-line details in the full BillTally report by Director of Research Demian Brady, there are a variety of mediums for you to get the information you need to educate yourself on where Congress wants to take your tax dollars.

For the visually inclined, there are four infographics, each detailing a part of the BillTally report. If you want to see what the entire Congress or what each chamber has proposed (House and Senate), we've parsed out the data so you don't have to. An interesting fourth visualization takes a look at when savings bills have been introduced in both the previous Congress and in 2013. One of the questions we are constantly looking at is when and how cut proposals are taken up because spending reductions do not happen without legislative action.

The audio-lovers are not forgotten as Brady went on NTU’s weekly podcast, Speaking of Taxpayers, to give you the highlights and important findings of how the Tea Party has affected spending proposals and whether net agendas are following historical trends or breaking new ground. For the first time, NTUF staff exhibited our on-camera skills by hosting a Google Hangout:

Of course, there are overviews of the report in the form of press materials and in-house summaries but perhaps more importantly are some posts by Policy Analyst Michael Tasselmyer that delve between the lines. So far, he has posted on two of Congress' larger spending categories, healthcare and jobs programs, and on the timing of savings proposals. Additionally, Tasselmyer explored the differing defense budgets of the House and Senate (the findings may surprise you). Perhaps you want to know which bills would most dramatically affect the budget? We've got you covered.

Is this the first you're hearing of the many levels of BillTally analysis? If so, you can be on the cusp of Congressional research by subscribing to The Taxpayer’s Tab, NTU Foundation's weekly update. Tab subscribers are the first to see the costs and implications of bills making the headlines and generating buzz in the policy world. Not a fan of email or love NTUF so much that you want more? Follow us on Twitter and give us a shout out! And remember, there's a lot of ways that NTU Foundation helps out Americans and we're always looking for new members. Are you up for a challenge of getting government spending under control? We need you!

Was there a part of the recent BillTally report that surprised you? Post what your thoughts are on the $1.28 trillion in new spending that Congress could pass below.

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“Universal” Preschool Proposal a Lot Like Costly Medicaid Expansion
Posted By: Lee Schalk - 09/09/13

President Obama wants to lure states into his Preschool for All initiative (“universal” pre-K for moderate-income and middle class 4 year-olds) with the promise of $75 billion in federal tax dollars over 10 years. But while educating the next generation is a worthy cause, the President’s plan is chock-full of problems for taxpayers.

The President has suggested a 94-cent-per-pack cigarette tax hike to pay for the program – a regressive tax that would generate an unreliable revenue stream, to be sure. If the President has his way with cigarette taxes, he’ll have increased the federal cigarette tax rate by an unbelievable 500 percent. You read that right. Back when the President assumed office, the federal rate was 39 cents per pack. That all changed in 2009 when the Children’s Health Insurance Program Reauthorization Act was signed, upping the rate to $1.01. Tack on an extra 94 cents, and smokers would be forced to shell out nearly $2 per pack on top of their state and local rates. This is bad news for smokers and non-smokers alike, because smoking rates in the U.S. have been declining over the past 50 years, meaning that cigarette taxes should not be relied on for long-term funding.

There simply wouldn’t be enough cigarette tax revenue to keep the universal pre-K program up and running, and additional tax hikes would be necessitated. The historical precedent for this outcome is strong: as a recent report from our research affiliate determined, in roughly 7 out of every 10 cases, state-level tobacco tax hikes enacted between Fiscal Years 2001 and 2011 subsequently fell short of their initial revenue estimates. Not surprisingly, 66 out of 96 state actions to raise tobacco levies during that same period were followed by increases in other kinds of taxes within a two-year period after each instance.

The proposed cigarette tax hike isn’t the only major problem with Obama’s pre-K plan. The Preschool for All initiative also bears a striking resemblance to another troubled federal-state venture that is currently being touted by the Administration—Medicaid expansion under the Affordable Care Act or “Obamacare.” In both instances, the federal government has offered up attractive funding match rates. While half of states have resisted Medicaid expansion so far, many lawmakers and governors have bought into the idea of “free” federal money, since the federal government is offering to cover 90 percent of the costs in the long term. With Preschool for All, states would chip in 10 percent of the costs in the first two years, 50 percent by year six, and eventually 75 percent in year ten. But what’s to stop the feds from reneging on their funding commitments? For Medicaid expansion, the President has already floated the idea of lowering match federal match rates, which would leave states with a greater burden than originally anticipated. It’s not difficult to imagine a similar bait-and-switch with Preschool for All, especially once its major revenue stream—cigarette taxes—falls short of projections.

Also like Medicaid expansion, the Administration is keeping mum on the topic of long-term cost for universal pre-K. At the state level, all we’ve heard about so far is the magical first year. Minnesota, for example, would receive close to $39 million from Uncle Sam in year one and only have to kick in $4 million in state funds. In year ten, Minnesota’s share will be 75 percent, or $32.25 million, if the match rates go as planned. But many unprincipled lawmakers simply can’t resist another hit of federal cash and are willing to ignore these future state costs in order to get the program started.

For the federal government, we’re told that the program should cost around $75 billion in the first 10 years, but beyond that, who’s to say? Is this another “camel’s nose under the tent” proposal? Some in Congress have called for an even larger federal role in pre-K and so has the President. Medicaid was not originally intended to cover folks living up to 133 percent of the poverty line, but that’s exactly what the current expansion push is all about. Once pre-K for 4 year-olds is in place, there will be increased efforts to expand the program and its budget. Are taxpayers prepared for more tax hikes to underwrite it?

All indicators point to the Preschool for All initiative being a bad deal for taxpayers. Its prime target for tax hikes is smokers, and once that revenue fails to materialize, all Americans will be made to pay. Education and health care are both important domestic issues and not without their share of challenges. But taxpayers shouldn’t be fooled into thinking universal preschool and Medicaid expansion are the answers. As our economy struggles to get back on track, Americans need tax relief, and that can only happen if Washington and the states control their reckless spending habits and avoid costly programs like Preschool for All.  

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Celebrating Milton Friedman and School Choice
Posted By: Austin Peters - 08/07/13

In a time of increased federal government intervention, school choice has been a silver lining for small government supporters. The idea that parents should be empowered to choose the school their children attend and that market mechanisms can be utilized to fix the declining American school system has gained popularity with both politicians and the public. Surprisingly, many forget who the intellectual father of the school choice movement is none other than the esteemed economist Milton Friedman.

Friedman's discussion of school choice started over 50 years ago in an essay "The Role of Government in Education." The piece outlined two main arguments for school vouchers that are still the basis of the voucher system today. First, he argued that schools based on choice would lead to competing among local institutions. The better a school's results, the more students the school would have elect to attend, and the more money they would receive through either government payments or vouchers. Secondly, Friedman argued that voucher programs are a more moral system because it did not limit children's choice of educational institutions to one designated by their home address.

From 1955 on, Milton Friedman became one of the lead champions of school choice. However, the idea faced heavy resistance from teacher unions and politicians on both sides of the isle. Nonetheless, in typical Friedman style, he pushed on with his efforts. Over time, he succeeded in sidestepping special interests and politicians by finding avenues to speak directly with citizens about the issue. For example, Milton dedicated a full episode to the topic during his very popular PBS Free to Choose Series that aired in 1980.

The concept of school choice continues to fight for acceptance. Initially a preferred method of liberal activists to help impoverished urban minorities escape poverty, the idea was later adopted by the Republican Party when Ronald Reagan made it the focus of his education plank in the 1980 Presidential Election. After Reagan's electoral success, it took another decade before Friedman saw his ideas become reality in the city of Milwaukee, Wisconsin when a voucher program was adopted for some students in its school district in 1990.

While Milton would prefer to see every child already enjoying the option of choice, the movement has made significant progress since it was first conceived. There is no doubt that the father of school choice would be proud to see Wisconsin, Ohio, Florida, Georgia, and even the District of Columbia adopt some variation of a voucher system. He would surely smile his iconic smile at the innovation school choice supporters have utilized to create charter schools and tuition tax credits in various states across the country.

With Friedman Legacy Week over, many of us reflect upon the economic genius of the man who shaped so much of the world as we see it but let us not forget his devotion to promoting school choice.

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Ac-“customed” to Waste?
Posted By: Pete Sepp - 08/05/13

All too many federal agencies can be cited for having budgetary skeletons in their closet, and U.S. Customs and Border Protection (CBP) is no exception. From poorly managing a drone fleet purchase, to making questionable demands for more employees, CBP has raised fears for the security of taxpayers’ wallets in the past. Yet, Congress has an opportunity to ease future fears, over a controversial new CBP project, before it can cause a fiscal fright.

Two years ago, the U.S. Department of Homeland Security (DHS) concluded a letter of intent with the United Arab Emirates to build a “pre-clearance” facility at Abu Dhabi airport which would allow travelers to the U.S. to clear customs before arriving on American soil. So far, so good: pre-clearance can not only save time and reduce congestion at U.S. points of entry, it can also help ease the way for tourists who contribute to economic activity while visiting here.

Now for the not-so-good:

  • According to Airlines for America statistics, Abu Dhabi airport accounted for less than 600 passenger arrivals per day to the U.S. in 2012, ranking it #80 on the list of top origin points to our country.
  • Right now, no U.S.-based carriers even fly from the Abu Dhabi International Airport back to here.  All other CBP pre-clearance zones in Canada, Ireland, and the Caribbean serve many airlines, including U.S.-flagged ones.
  • The primary beneficiary of the deal would be Etihad Airways, the state-owned airline of UAE. Thanks to this status Etihad enjoys an advantage over private airlines around the world that are subject to corporate profit taxes of their home countries. Which brings us to …
  • Another advantage conferred by the United States under the auspices of the Export-Import Bank (Ex-Im), whose risk-taking and subsidization have long been a concern for taxpayer advocates such as NTU. Etihad snagged $593 million in loan guarantees from Ex-Im last year for aircraft purchases, and could qualify for preferential financing that our own airlines (by definition) can’t get through Ex-Im.
  • Meanwhile, The Wall Street Journal is reporting that over the preceding year (before overblown sequester scare tactics), the wait times for getting through customs at stateside airports have “increased dramatically.”

All these drawbacks lead to one long question: Given CBP’s service challenges at existing airports, is it really a good idea to plow ahead with a facility whose use will be comparatively scarce in the near term, and give another leg-up to an airline backed by its own government as well as ours, at the expense of an already overtaxed flying public?

And “overtaxed” is an understatement. As NTU has often noted, the typical overall government tax and fee burden of 20 percent on a $300 domestic airfare is higher than the average effective rate a middle-class American is likely to pay on his or her 1040 income tax return. International air travelers can have it even worse, with impositions such as separate departure and arrival taxes along with a passenger agricultural inspection fee (which the Obama Administration ill-advisedly considered raising in 2009) and a customs fee.

Proponents of the CBP station at Abu Dhabi argue that the investment of U.S. tax dollars will be minimal since UAE will pick up 85 percent of the project’s expense under the current agreement. But that’s little comfort to tax-weary travelers in America (see above), who remain worried that whatever share they will be forced to commit could escalate if construction or operating costs are not contained. Meanwhile, there’s that pesky matter of how best to apply CBP’s fee collections as well as appropriations from general funds – should they be used to expedite higher-priority passenger and cargo entry-exit services?

Many Members of Congress seem to think so. In June, the House of Representatives passed an amended FY 2014 DHS Appropriations Bill specifically blocking the Abu Dhabi pre-clearance scheme. In May, a bi-partisan group of 11 Senators echoed the sentiment of their House colleagues in a separate letter to DHS Secretary Janet Napolitano, questioning whether the agency’s “decision was made as a result of a risk based analysis.”

Alas, earlier this month DHS announced it was moving forward with a data-sharing agreement that could pave the way for the facility’s activation, even as it faces a concerted petition effort from interested industry groups with considerable clout.

Regardless of the politics involved, the taxpayer aspects of the issue deserve further exploration – that goes not only for the Abu Dhabi pact but also the ever-troubling direction of the Ex-Im Bank. Allowing the free market and fiscal responsibility to sort out needs from niceties would provide some badly-needed bone-rattling for those accustomed to budgetary business as usual in Washington.

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