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When It Comes to Foreign Investment, Sales Pitch Should be to Congress
Posted By: Nan Swift - 05/20/14

Marketplace reports that President Obama is meeting with business executives today to pitch investment in the U.S.:

Last year, foreign investment in the U.S. was roughly $193 billion -- down from its peak of $310 billion in 2008.

Dartmouth’s Matthew Slaughter says the U.S. attracts investments from foreign companies by telling executives that the U.S. is "the most innovative, open, largest economy on the planet.”

But Slaughter says many foreign company leaders respond by saying growth in the U.S. has slowed compared to developing countries like China, not to mention an aging infrastructure, complicated immigration system and high corporate taxes.

Slaughter does a good job summing up the problem, however, in the past six years our infrastructure hasn’t aged a great deal and the immigration system hasn’t grown significantly more complicated.  While those things don’t help, what is hurting the most is our high corporate tax rate. For the past two years running, the U.S. has had the highest corporate tax rate among industrialized economies and the effects are clearly taking a toll. This problem continues to worsen as more and more countries cut their rate each year.

As NTU has noted again, and again, and again, the best way to declare the U.S. open for business is to lower the corporate tax rate and pursue other reforms, such as rolling back burdensome regulations, making our business climate competitive once again.  Before President Obama sits down with global investors, he should first sit down with the legislators on Capitol Hill who need to act before the U.S. falls further behind.

 

 

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In the Battle for Tax Extenders, "It's Complicated"
Posted By: Nan Swift - 05/19/14

Just a few days ago, GOP Members of the Senate voted to block the EXPIRE Act, offered as a substitute amendment to  H.R. 3474, over Senate Majority Leader Harry Reid’s (D-NV) repeated refusal to consider amendments to the legislation. The same problem shut down debate of the Portman-Shaheen energy efficiency legislation last week. 

Even before Reid once again hijacked the Senate’s normal order, the EXPIRE Act’s future was anything but certain. The bill comprised a two-year extension of 55 tax credits, deductions, and other tax policies, most of which recently expired at the end of 2013. These tax provisions, often referred to as “extenders,” are a complex issue to discuss. Not surprisingly, those within the conservative movement have a variety of perspectives on this matter, centering on the true nature of a tax credit, what constitutes a “good” or “bad” tax extender, and whether or not the bill’s broad-based, pro-growth provisions outweigh its less beneficial elements .

These differences of opinion were evident earlier last week with Club for Growth and Heritage Action holding one view and Americans for Tax Reform (ATR) another.  That these venerable free-market institutions – who agree on many other issues – should come to such different conclusions is a good illustration of just how much remains to be sorted out among people of good will.

The Club for Growth and Heritage Action’s vote alerts focused on the fact that the EXPIRE Act is packed with tax provisions that benefit only a narrow part of the economy, distort markets, and prop up otherwise unprofitable industries, such as the notorious Wind Production Tax credit. Heritage explained:

The Senate’s tax extenders — and indeed the entire process surrounding the extension of expiring tax provisions — is one of the most egregious examples of Washington using its powers to prop up well connected interests.

For example, the Senate package includes over a dozen targeted tax provisions aimed at energy production, most of which are geared toward so-called green energy.  According to the Heritage Foundation, Congress designed many of the provisions to “artificially tilt the energy market in    the direction of certain renewable sources or reward certain taxpayers for behaving how the government would like them to.”  Others are “narrowly tailored so only certain industries can    benefit, which is unfair.”

In light of preferential tax policies directed toward likes of NASCAR and horse racing, it’s easy to see why taxpayers should be outraged at such an obvious manipulation of the tax code on behalf of favored industries. At the same time, as ATR’s supportive vote alert  argued:

Some tax provisions should not return – the wind production tax credit springs to mind, but there are a number of others. However, these are more than balanced out by extremely important tax relief provisions which must not be lost from the code.

The vote alert went to great lengths to differentiate between good and bad provisions, highlighting the fact that “many conservatives have been deeply confused on this distinction,” before finally warning that “the mandate for the Senate is clear: do no harm.”

The Tax Foundation  did not take a position on the EXPIRE Act, but it added further nuances to the debate as it carefully laid out the case for good and bad tax extenders in this article:

Often, Congress keeps all of the extenders – which includes a whole slew of tax breaks for individuals and businesses – but they shouldn’t. Many of the 55 expired provisions are economically distortive, encouraging some economic activities over others. In fact, there are only a small few that should be kept in order to make the tax code more neutral by mitigating the tax code’s biases against savings and investment.

And here the Tax Foundation delineated the “cost” of each provision, bringing to light to another major complicating factor in the tax extenders fight.  While some repeatedly reference the “cost” of a particular tax credit, others argued that these provisions are effectively already on the books and thus, did not reduce anticipated tax revenue. Due to the perceived “cost” of the tax credits, the EXPIRE Act also contained other revenue raisers to “offset” the extenders. The Heritage Foundation did a good job of explaining the problem:

… the Congressional Budget Office incorrectly scores an extension of previously-enacted tax cuts as if they were wholly new tax cuts. Under budgeting rules it follows, this means Congress must cut spending or raise other taxes to avoid “adding” to the deficit.

But reviving once again a repeatedly-extended tax policy is not a tax cut. These policies have been in place for years, some — such as the Research and Experimentation (R&E) Credit — for three decades. If they expire, taxes will rise on those taxpayers who use them. Extending them merely prevents a tax increase, so there is no need to offset their “cost.”

While it will be hard to ever completely reconcile these very thoughtful perspectives, what all free market advocates can agree on is the need for fundamental, comprehensive tax reform, in particular a lower corporate tax rate.

Despite earnest attempts to jump-start such a discussion, that day is still a long way off. However, in the meantime, the House has taken a good approach toward the extenders problem by bringing the provisions up in a piecemeal fashion that will allow them to pass or fail based on their specific merits. Such was the case earlier this month with a bill to make permanent the research and development tax credit that NTU supported here. This also avoids the log-rolling of the Senate’s EXPIRE Act package while keeping some of the more voracious special interests at bay.

The best prospect for taxpayers to emerge from this extenders fight with a win is to urge the House to stay the course and when it comes up again, encourage your Senators to insist on good amendments to the EXPIRE Act that would remove some of its narrowly tailored and economically dubious tax provisions with an eye toward across-the-board rate reductions. Still, one thing is for certain: without real reforms to make good policies permanent, we’ll be haggling over the minutiae of tax extenders again soon.

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Latest Taxpayer's Tab: Promoting U.S. Tourism
Posted By: Michael Tasselmyer - 05/19/14

Taxpayer's Tab Update

The latest statistics show that tourism accounted for nearly 2.8 percent of total U.S. GDP in 2013, and the industry as a whole supports 5.7 million jobs. The latest edition of the Taxpayer's Tab features a bill from U.S. Congressman Gus Bilirakis (R-FL) and Senator Amy Klobuchar (D-MN) which would reauthorize Brand USA, the public-private organization that promotes U.S. tourism to international audiences, through 2020. The Travel Promotion, Enhancement, and Modernization Act has been sponsored by 66 Representatives and 25 Senators.

Also featured in the newest issue:

  • Most Expensive: Congressman Cory Gardner (R-CO) has introduced the Covering People With Pre-Existing Conditions Act, which would expand state-run high risk pools to provide health coverage to those unable to qualify because of their health history. It would cost $7.5 billion over the next five years.
  • The Wildcard: Senator Sherrod Brown (D-OH) and Congressman Jim Matheson (D-UT) introduced the Strategies to Address Antimicrobial Resistance (STAAR) Act. It would expand funding for research that combats antibiotic resistance by $100 million per year.
  • Pricey Bus Stops, New Concern About the Debt: NTUF staff has been blogging lately, this week about a new report from GAO on the problem of U.S. debt and an Arlington County, VA transportation proposal that could cost taxpayers hundreds of millions of dollars.

The latest edition of the Tab is available online.

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NTU’s Nan Swift Talks Abuse of Emergency Overseas Ops Funding; Tech Updates - Speaking of Taxpayers, May 16
Posted By: Douglas Kellogg - 05/16/14

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NTU Federal Affairs Manager Nan Swift stops by to talk about efforts to stop the inappropriate use of OCO (Overseas Contingency Operations) which avoids proper budgeting and "Tax Extenders." Also, FCC moves forward on net neutrality, MFA draws heat in Georgia, and the Outrage of the Week has Congress flying high on your dime.

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(VIDEO) Sequester-pocalypse Fear Mongering vs. Reality
Posted By: Douglas Kellogg - 05/15/14

Congratulations! If you're watching this video, you're one of the 312 million Americans who narrowly survived the "Sequester-pocalypse"!

Watch President Obama and others prophecy about the chaos the moderate "sequester" spending reductions would supposedly cause. In reality, taxpayers saved $85 billion and only one federal employee was laid off. Oops!

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Not a Fan of $1 Million Bus Stop? How about $672K?
Posted By: Dan Barrett - 05/14/14

ARLnow.com, a local news site for Arlington, Virginia, updated residents on the costs of new bus stops proposed along Columbia Pike, a major artery running right up to the Pentagon. As opposed to the $1 million prototype bus stop that I wrote about last year, Arlington County officials released an updated design with a new cost per stop: between $362,000 and $672,000. The three newly termed “transit centers” look similar to the “Super Stop” design but are shorter in height, have wider canopies, and have side windscreens. Each stop will have a different cost, according to its size:

  • Single-Sized: $362,000
  • Standard: $469,000
  • Extended: $672,000

The county provided a breakdown in costs for construction and site design and project management, with the latter representing approximately 23 percent of the total cost for the small- and medium-sized stations.

This all might be an improvement but taxpayers who answered a poll on the site say it’s still too high a cost:

Arlington, VA Bus Stop Poll Results

Area residents questioned why existing bus stop designs (the classic three-sided, glass enclosures) are being replaced for a more expensive, unproven design (especially since the new design still does not protect those waiting from the elements. Others voiced concerns over the still-high costs. One commenter wrote that a standard stop costs $30,000 and some can cost as much as $58,000 across the border in Maryland. The question I ask Arlington Board members is, are the artsy designs of the stops worth spending millions of local taxpayer dollars instead of putting those funds towards other concerns or taxpayer relief?

On a county-level, the cost of the overall effort went from $20.9 million to $12.4 million, a 40 percent decrease. Yet, those savings may be swept away as the Washington Post just reported that the Columbia Pike streetcar – a major reason the county cites for updating the bus stops -- will cost $358 million, or $100 million more than the county’s previous projection. On top of all of this, taxpayers across the country need to keep any eye on this issue because 48 percent ($140.5 million) of Arlington County’s share of the expenses are expected to come from the federal government. The issue comes down to whether Arlington officials are doing what’s best for residents or just building pretty things that will ultimately go underused.

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New Report, Familiar Conclusions
Posted By: Michael Tasselmyer - 05/13/14

"A fundamental imbalance..."

"...continuous growth in debt..."

"[U]nsustainable."

The Government Accountability Office (GAO) uses all of these phrases to describe its most recent long-term budgetary projections, underscoring a less-than-ideal outlook for federal debt and deficits. GAO ran two simulations in its latest report: a "Baseline Extended" forecast, which uses the Congressional Budget Office's (CBO) legislative assumptions, and an "Alternative Scenario" that assumes revenue and discretionary spending will grow at rates closer to historical averages. Either way, GAO predicts spending will rapidly outpace revenues in the coming years:

GAO Budget Outlook

GAO Budget Outlook

As the graphs above show, net interest and mandatory spending programs will continue to grow as a percentage of GDP under both models, even in the "Extended Baseline" scenario which assumes tax extenders will not be renewed and discretionary spending caps will be upheld. The report also mentions looming demographic shifts that will continue to affect the nature of federal spending for years to come: by 2029, nearly 11,000 baby boomers will reach the retirement age of 65 every single day, which means much higher spending on retirement and health benefits.

The Committee for a Responsible Federal Budget has some helpful context on the GAO's assumptions, and how their projections compare to others.

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Latest Taxpayer's Tab: A Legislative Triple Crown
Posted By: Michael Tasselmyer - 05/11/14

Taxpayer's Tab Update

Last week's Kentucky Derby drew a near-record crowd of 164,000 and was seen by another 15.3 million viewers on TV, and some sources estimate that Churchill Downs pulled in as much as $100 million in revenue throughout the course of the week.

The horse racing and breeding industry is a major economic boost for many states; accordingly, it's drawn its share of attention from legislators and regulators in Washington, D.C over the years. Ahead of the next two legs of the Triple Crown, NTUF took a look in the latest edition of The Taxpayer's Tab at some of the issues the industry faces and how Congress has proposed to deal with them.

Featured in this week's issue are bills from Congressman Andy Barr (R-KY) that would modify how horse sales affect owners' tax liabilities, which has also been discussed as part of the "tax extender" legislation that Congress has revisited frequently over the years. NTUF also looked into bills that address animal rights groups' concerns about how humanely commercial horses are treated, including the ways in which they're transported across the country and trained for competitions and exhibitions. There are also new versions of old proposals that seek to regulate the types of helmets riders must wear, and the extent to which the federal government is responsible for protecting wild horse populations.

More detail on all the equine legislation Congress is considering is available in The Taxpayer's Tab.

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There’s No Good Reason for Congress to Impede Cable Merger
Posted By: Brandon Arnold - 05/09/14

Yesterday, the House Judiciary Committee’s Subcommittee on Regulatory Reform, Commercial, and Antitrust Law held a hearing on the proposed merger of Comcast and Time Warner Cable (TWC), during which Comcast Executive Vice President David Cohen was peppered with a number of tough questions from lawmakers. That should come as no surprise – this is a significant transaction that will affect tens of millions of consumers.

While lawmakers are right to carefully scrutinize the deal, they should resist the urge to more actively involve the federal government unless there is clear and specific reason to believe that laws are being broken or that the merger would result in excessive market consolidation. Neither appears to be the case here.

That’s why NTU joined a coalition of free market organizations to author a letter to Senators Chuck Grassley and Mike Lee – both key members of the Senate Judiciary Committee – to urge them to support the consolidation.

The letter makes a number of strong arguments about the importance of free markets and the vast potential benefits for consumers, but the key takeaway for policymakers should be that the merger will not limit consumer choices in any way.

As it states: “Because Comcast and TWC do not operate in the same markets (and therefore, consumers will face no loss whatsoever of competitive choice in television and video, broadband Internet, and telephone choices) there is no apparent substantive antitrust concern here. The transaction will simply swap one cable company for another in some markets – something which is competitively neutral on its face.” (emphasis mine)

Again, this is a $45 billion deal that will affect tens of millions of cable and Internet users, so it certainly makes sense for Congress to focus attention on it. But at the same time, lawmakers should avoid engaging in political grandstanding or, even worse, intervening in a transaction that will benefit consumers.

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Jim Pettit Talks New Data on Taxpayers Fleeing High Taxes; State Update; Did Sequester Doomsday Happen? - Speaking of Taxpayers, May 9
Posted By: Douglas Kellogg - 05/09/14

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How many jobs did "sequester" actually cost the federal government? Ex-Im Bank is in NTU's crosshairs. Jim Pettit discusses his recent Human Events piece analyzing IRS data on taxpayer migration - Florida is the big winner, New York is the big loser. State Affairs Manager Lee Schalk gives us the lowdown on the states. Plus, the Outrage of the Week!

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