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Latest Taxpayer's Tab: What Did Congress Miss?
Posted By: Michael Tasselmyer - 12/21/13

Tab Insert

The Murray-Ryan budget compromise cleared all of the Congressional hurdles this week, capping off a tumultuous negotiation process that began after the government shutdown earlier in the year. In this week's edition of the Taxpayer's Tab, National Taxpayers Union Foundation has a detailed breakdown of what exactly is in the bill, as well as some of the other deficit-reduction options that Congress left on the table.

The compromise bill:

  • Increases federal spending by $65 billion (75 percent of which will be seen in the first two years alone);
  • Raises the self-imposed budget caps Congress recently agreed on;
  • Offsets additional spending by $78 billion -- but 75% of that amount won't be realized for another six to ten years;
  • Accounts for half of its proposed savings by way of increased user fees.

Congress did, however, have other options for budget cuts throughout the year. A list of all the savings bills we identified as part of the BillTally research program is available for browsing and download in this week's edition.

Check out the Tab online here and be sure to subscribe to our mailing list for future updates.

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Shining a Light on Government Advertisements
Posted By: Brandon Arnold - 12/20/13

We’ve been exposed to all sorts of ads promoting Obamacare lately – from beer-guzzling fraternity “bros” to the recent “pajama boy.” Fortunately, Americans are starting to ask if these ads are being paid for with taxpayer funds.

Such questions are certainly warranted given the federal government’s history of wasting public resources.  For example, Senator Tom Coburn (R-OK) just pointed out in his “Wastebook 2013” that the federal government took $65 million of the emergency funds provided for Hurricane Sandy disaster relief and spent it on tourism ads for New York and New Jersey.

It’s clear that the government needs to provide more transparency and sunshine about its expenditures. Last month, former National Taxpayers Union Foundation intern Curtis Kalin identified some of the features of the “Taxpayer Transparency Act,” which was introduced by Rep. Billy Long (R-MO). The bill would require government agencies to disclose the use of taxpayer funding in any print, online, radio or television advertisements.  This seemingly small step could go a long way to helping people understand how their tax dollars are being used (and misused).  Speaking for National Taxpayers Union, I’m pleased to hear that Senator Roy Blunt (R-MO) will soon introduce companion legislation in the Senate.  

In an ideal world, politicians and government agencies wouldn’t squander public funds on advertisements. But until we can achieve more fiscal discipline in Washington, we need legislation like the bills introduced by Rep. Long and Sen. Blunt so we’ll at least know when our money is being spent on such activities.

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Safeguards Against Predatory “Digi-Taxes” Advance
Posted By: Nan Swift - 12/20/13

Desperate to cover their bills from chronic overspending, too many states and municipalities are taking President Reagan’s famous “If it moves, tax it” to be a prescriptive rather than cautionary quip. As the market for digital goods such as music downloads and online subscriptions grows, so also are fears that governments could see the burgeoning marketplace as a would-be cash-cow.

These fears aren’t unfounded. For instance, cell phone users have been hit hard with unfairly high tax rates, as states and localities have scrambled to add predatory levies on wireless phone service – all to pay for projects that have little to do with improving the communications network. The average nationwide tax burden on wireless service is far above the typical rate imposed on other goods and services (click here to learn more about the Wireless Tax Fairness Act). In addition, taxing digital goods can be an especially complicated endeavor, and it’s important to ensure consumers aren’t forced to foot the bill for multiple, burdensome taxes on the same purchase.

Because the instinct of most governments is to tax first and ask questions later when encountering a potential revenue stream, it is essential that Congress get out ahead of this problem with practical guidelines. With purchases crossing state and international boundaries, there’s a clear-cut role for Congress to define the jurisdiction with the right to tax a digital transaction and ensure that costly taxes and regulations don’t impede digital commerce.

As NTU Executive Vice President Pete Sepp explains in the video below, we can’t let bad tax policies stifle the economic promise of the Internet.

To that end, Senators Ron Wyden (D-OR) and John Thune (R-SD) have introduced the Digital Goods and Services Tax Fairness Act of 2013 as S. 1364 in the Senate.  In the House, Representatives Lamar Smith (R-TX) and Steve Cohen (D-TN) have introduced a companion, H.R. 3724. Let’s hope that when Congress comes back legislators can work toward the swift passage of this common-sense bill.

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Where Could Congress Cut Spending?
Posted By: Demian Brady - 12/18/13

The Senate is expected to pass the Murray-Ryan budget compromise bill as soon as today. As we noted, the bill increases federal spending by $65 billion (75 percent of which will occur in the first two years) by raising budget caps that were agreed to just a few years ago. It also includes offsets of $78 billion over the next 10 years -- three quarters of which occur six to ten years from now. Moreover, nearly half of the savings in the bill are achieved by increasing user fees in a way comparable to a tax increase.

The major flaw of this proposal is that it increases spending now and promises to pay for it years later. By approving this bill, Congress is weakening recently-passed, self-imposed budget limits … so why should taxpayers expect that Congress they will abide to the reductions in this compromise over the long term? Some Members, including Congressman and House Budget Chair Paul Ryan (R-WI), have already signaled that legislators will likely revisit the Cost-of-Living Adjustments, or COLA, slowdown for certain military retirees that was included in the compromise (savings of $1 billion over five years and $6 billion over ten). It is conceivable that similar carve outs will occur as elected officials give in to pressure for more spending.

While it is disappointing that Congress is not choosing to replace the automatic across-the-board sequester caps with an equal amount of upfront targeted spending cuts, unfortunately, it is not surprising. Historical data from BillTally, NTU Foundation's legislative tracking program, shows that Congress produces far more proposals to increase spending than ways to trim the budget. The same trend is observed in this Congress. As of December 17, we have identified 84 savings bills and 424 spending bills in the House and 40 savings bills and 254 spending bills in the Senate. 

A complete list of all the spending reductions is available as an Excel spreadsheet for download, or can be browsed online. The list also includes some savings ideas that were included as partial offsets in bills that would, on net, increase spending. 

NTUF observed that during the 112th Congress, half of all the cut bills were authored during the first six months and 75 percent by the end of the first year, becoming more scarce during the second year. We are still in the process of reviewing and scoring legislation for the current Congress, but so far, the bulk of the savings we identified were introduced during the first six months of the year.

There is certainly no shortage of places Congress could look for more spending reductions in the $3.5 trillion budget. Lots of reference sources are available: from Senator Coburn's (R-OK) Wastebook, to NTU & US PIRG's list of cuts, and the Congressional Budget Office's most recent Budget Options reports on discretionarydefense and mandatory reductions, to name just a few.

As federal spending, debt, and overreach are set to figure more prominently in policy debates and campaigns during this upcoming election year, will taxpayers see their Representatives and Senators drafting more cut proposals in 2014? Stay tuned to find out because NTUF will continue to keep a close watch on Congress throughout the New Year!

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Senator Coburn Releases 2013 Wastebook
Posted By: Nan Swift - 12/17/13

This morning the Senate voted on cloture to move forward the sequester-busting budget deal the House passed last week. The deal is proof-positive that Congress can’t keep spending in line with modest budget caps, even when those caps are The. Law.

Before Senators vote on final passage tomorrow, they should consider Senator Coburn’s (R-OK) “Wastebook 2013,” released just a few hours ago. This year’s Wastebook highlights nearly $30 billion in “questionable and lower-priority spending.” Sen. Coburn goes on to note that this is just “a small fraction of the more than $200 billion we throw away every year through fraud, waste, duplication and mismanagement.”

Some of the outrageous highlights of this year’s Wastebook include:

  • More than 100,000 federal employees being paid a salary of at least $100,000 were furloughed as non-essential. Each of these were paid $4,000 for the time off of work during the shutdown. [emphasis added]
  • $297 million on a blimp for the Army that flew once, for 90 minutes, over Lakehurst, NJ.
  • $65 million in Hurricane Sandy “Emergency” Funds spent on TV ads
  • $325,525 on a National Institute of Health study that found wives should calm down faster during arguments with their husbands

Go here to read the whole list.

Only a few months ago, House Minority Leader Nancy Pelosi (D-CA) proclaimed, “The cupboard is bare. There’s no more cuts to make.” However, as Senator Coburn’s annual Wastebook so ably demonstrates, the cupboard is far from bare.

Congress shouldn’t be resorting to accounting gimmicks and promised cuts in the future to pay for more spending now. We often say that Congress needs to make tough decisions on spending, and they do, but as the Wastebook and NTU’s own report with our friends at U.S. PIRG prove – there are still a lot of easy decisions Congress is leaving on the table.

Senator Coburn goes on to point out, “There is more than enough stupidity and incompetence in government to allow us to live well below the budget caps. What’s lacking is the common sense and courage in Washington to make those choices – and passage of fiscally-responsible spending bills – possible.”

Click here to call your Senator now and urge them to keep the caps and oppose the budget deal.

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(AUDIO) Taxpayers Get Raw Deal - Speaking of Taxpayers
Posted By: Dan Barrett - 12/16/13

NTU Foundation's Demian Brady and NTU's Brandon Arnold both offer insight on why the numbers don't add up and what to do as the bill heads to the Senate. Plus the Outrage of the Week! 

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"Deficit Reduction"
Posted By: Demian Brady - 12/12/13

Appealing to skeptics of the Ryan-Murray budget compromise, Speaker John Boehner urged, “Listen, if you’re for deficit reduction, you’re for this agreement.” The plan would increase spending now and offset it over the next ten years. Spending now, deficit reduction … later. This sort of budgeting is the reason the federal government has chronic deficits.

Somewhere, Lucy Van Pelt is holding a football, waiting for someone to try and kick it.

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This Backloaded Budget Deal Is Bad News for Taxpayers
Posted By: Brandon Arnold - 12/12/13

After spending some additional time reviewing the budget deal, it keeps looking worse and worse for taxpayers.  The deal’s architects are trumpeting the notion that it will reduce the deficit by $23 billion over ten years.  This is technically true.  But the bill is so incredibly backloaded that it will actually increase the deficit by approximately $26 billion over an eight-year window.

It’s not until the last two years of the deal that things begin to improve. That’s because the largest piece of deficit reduction, $28 billion, comes from merely extending into 2022 and 2023 the mandatory spending caps established by the Budget Control Act of 2011 – the same bill that created the “sequester” many lawmakers have been eager to ditch.  If you pull out that provision, you’re left with a bill that would increase the deficit by about $5 billion. 

Taxpayers should be very concerned about the ability of Congress to keep long-term spending reductions on the books. But we can all be certain that in the near term, the $63 billion in spending hikes scheduled for 2014 and 2015 will take place.

And there’s the rub when it comes to this bill. Taxpayers are being asked to trade today’s spending hikes for tomorrow’s spending cuts. The deal’s proponents promise us that the cuts will occur because they will be part of the law.  But the sequester they are trying to undo is part of the law, too. If Congress can’t be trusted to stick to current law and abide by the sequester’s spending caps, how can it be trusted to pare back spending nine or ten years from now?

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Report on America’s “Broken” Tax System Shows Cracks of Its Own
Posted By: Pete Sepp - 12/12/13

Many voices, on various points of the political spectrum, concur that America’s corporate tax system is afflicted with a high rate, mind-numbing complexity, and heavy compliance burdens. Yet, the Center for Effective Government recently came out with a report attempting to demonstrate that there is no correlation between lower corporate tax rates and job creation. And while practically everyone agrees with the first line of the report’s Executive Summary – “The American corporate tax system is badly broken” – that’s not a good reason to buy all of its other conclusions.

The report states that, “Our examination of the evidence found no relationship between cutting tax rates on corporate profits and job growth.” And therein lies one major problem – the “evidence” itself.  As with a recent report from the Government Accountability Office, which we critiqued here, using a sample over a small window of time to calculate effective tax rates does not give a complete picture.

The time period used in the report – 2008 to 2012 – was one of abysmal job creation across the entire economy due to the severity of the Great Recession. Furthermore, corporations have demonstrated time and again how profits and losses fluctuate over several years based on expenditures such as research and development. So tying low job growth during a recession to tax rates over a short time period can’t possibly tell the whole story.

Connecting higher corporate taxes directly to increased job creation, without taking into account other factors – such as a given company’s industrial sector – is also tricky. It’s important to adjust for other reasons why tax rates may have been lower or higher (higher capital expenditures for which deductions apply) or why job creation may have increased or decreased (strength of an industry).

Although the report does acknowledge some need to overhaul the tax system, the agenda is clear in its data presentations, which purport to show why businesses must contribute more of the “revenue needed to invest in modernizing the transportation, information, communications, and energy infrastructure.”  In current budget lingo, “invest” is often code for “spend a whole lot more.” Furthermore, as my colleagues at the Tax Foundation ably pointed out, the study utilized “apples to oranges” comparisons of corporate profits and corporate taxes to paint a distorted picture.

Also tellingly, the study’s introduction notes that had businesses paid the 35 percent tax rate on all of their profits, “total corporate tax receipts would have been $630 billion (rather than the $242 billion they actually paid), and the deficit would have been reduced by nearly a third.” Of course, the same could be said for individuals: after all, if only America’s families would just cough up more at the regular statutory tax rates, instead of taking those pesky write-offs for things like mortgage interest, charitable contributions, or state and local tax payments, why the Treasury could be flush with surpluses.

The bottom line is that country after country continues to lower their corporate tax rates and simplify their taxpaying procedures, and they are doing this for a reason – to attract business and create job growth. Meanwhile, the U.S. tax system, with the worst rate in the industrialized world, continues to be a laggard in pursuing tax reform. Here’s hoping policymakers stop pointing fingers and start pointing the tax law in a better direction. 

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Ryan-Murray Budget Compromise Set to Increase Spending
Posted By: Demian Brady - 12/11/13

The Congressional Budget Office (CBO) released its cost estimate for the provisions of the Ryan-Murray budget compromise, known as the Bipartisan Budget Act of 2013. As was widely reported, the House's and Senate's budget leaders crafted their compromise around reducing the discretionary spending limits set in place under the bipartisan Budget Control Act of 2011. These cuts, automatically enforced across-the-board through a process known as sequestration, were effective and helped rein in the budget: not since the 1950s had federal spending dropped in two consecutive years. The numbers reported by the CBO show that this budget compromise would weaken the fiscal discipline that Congress and the President agreed to just a few years ago.

The Ryan-Murray compromise would lift the budget caps by nearly $45 billion in FY 2014 and $19 billion in FY 2015. The new spending resulting from gutting the caps would be spread over the next six years, but the bulk would occur in the first two years: $26.3 billion (42 percent) in the first year and $21.6 billion (35 percent) in the second year. At an annualized rate, spending would increase by an average of $12.4 billion through the first five years.

A part of this new spending would be offset through various changes in direct spending. Unfortunately, on an annualized rate, the spending cuts will not keep pace with the increases. While nearly 75 percent of the new spending occurs up front, nearly 75 percent of these savings occur after the first five-year budget window. The proposals would reduce spending by $19.5 billion through the first five years and by an additional $58.8 billion over the next five years. At an annualized rate, the changes to direct spending programs would save $3.9 billion a year through the first five years.

While many of the direct spending changes would enact some real reforms, such as increasing the amounts that new federal employees and members of the military will contribute towards their pensions (a savings of $1 billion over five years and $6 billion over 10 years), or reducing fraudulent payments to inmates ($33 million over five years and $80 million over 10 years), a large portion of the savings would result from increases in user fees and premiums.

The Ryan-Murray plan would increase aviation security fees, extend customs user fees by two years (currently set to expire in 2021), establish a new user fee for beneficiaries of conservation planning technical assistance, and would increase premiums to the Pension Benefit Guaranty Corporation. Combined, these four proposals account for $8.8 billion in savings through five years -- 45 percent of the total savings reported by the CBO.

On net, the Ryan-Murray plan would increase spending by $42.3 billion over the next five years, and, on paper, would eventually lead to spending cuts of $16 billion through 10 years. But if Congress can't even abide by the modest discipline it imposed on itself just a few years ago, it would be foolish to believe in the durability of these long-term, promised cuts.

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