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In the Battle for Tax Extenders, "It's Complicated"
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.0 Comments | Post a Comment | Sign up for NTU Action Alerts
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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.0 Comments | Post a Comment | Sign up for NTU Action Alerts
(VIDEO) Sequester-pocalypse Fear Mongering vs. Reality
Congratulations! If you're watching this video, you're one of the 312 million Americans who narrowly survived the "Sequester-pocalypse"!
Not a Fan of $1 Million Bus Stop? How about $672K?
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:
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:
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.0 Comments | Post a Comment | Sign up for NTU Action Alerts
"A fundamental imbalance..."
"...continuous growth in debt..."
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:
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.0 Comments | Post a Comment | Sign up for NTU Action Alerts
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.0 Comments | Post a Comment | Sign up for NTU Action Alerts
There’s No Good Reason for Congress to Impede Cable Merger
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. 0 Comments | Post a Comment | Sign up for NTU Action Alerts
Sequester’s Impact: One Job Lost, $85 Billion Saved
Remember all of the doomsday predictions about last year’s compulsory spending cuts better known as the sequester? Many claimed this “draconian” measure would lead to economic catastrophe, as thousands upon thousands of federal employees would be fired and the government’s operations would come to a screeching halt. In fact, one study by Goldman Sachs predicted “declines in federal employment by around 100k over the next few quarters.”
The U.S. Government Accountability Office (GAO) has just released a study that sheds light on the actual impact of sequestration, which cut 2013 expenditures by $85 billion.
The total number of federal job losses that occurred: one.
Yes, you read that correctly. The report states that the U.S. Parole Commission “implemented a reduction in force of one employee to achieve partial savings required by sequestration in fiscal year 2013.” According to GAO, that was the only layoff attributable to the sequester. That means Goldman Sachs’ prediction of 100,000 layoffs missed by a mere 99,999.
That’s not to say that the sequester had no effect on the government. To be sure, furloughs occurred and certain activities were delayed or otherwise hindered. But the fact remains that the federal budget is rife with wasteful, duplicative, and unnecessary spending. There is ample room to pare back federal expenditures and force the executive branch to prioritize its functions. Indeed, that’s exactly what GAO found in its study: “congressional and agency actions mitigated some potential effects by shifting funds to higher priorities while deferring or reducing funding for lower priorities.”
GAO’s study once again demonstrates that the federal government remains far too bloated. While targeted cuts to unnecessary or duplicative programs are generally the best approach to fiscal restraint, in the absence of such leadership across-the-board reductions like the sequester can also work. These findings should give momentum to the advocates of a leaner federal budget and embarrass those who predicted the sequester would cause an economic collapse.0 Comments | Post a Comment | Sign up for NTU Action Alerts
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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!0 Comments | Post a Comment | Sign up for NTU Action Alerts
This Congress is expecting to receive 4,291 reports from various government agencies. But a new feature in The Washington Post shows that lawmakers will actually read very few of them, if they are even written at all.
The story in The Post traces the long history of U.S. government reports, from the Mint’s annual update that began in 1792 to the 2000 law that required a briefing on the latest developments in dog and cat fur trading. Even in 1928, when there were only 303 reports to keep track of, legislators complained about the volume of reports they were sent every year.
Fast-forward a few decades and thousands of reporting requirements later, and many lawmakers and government employees have stopped reading and writing the reports altogether. Their inability to keep track of – let alone read and devote appropriate attention to – the reports is an instance of transparency and accountability gone awry, in that while many of the reports were intended to offer additional layers of oversight to government programs, they've become so numerous and overwhelming that the full benefits can simply become lost in the shuffle. One former staffer recounted to The Post how some of the thicker reports were literally used as doorstops, unread and disregarded.
The reporting carries a significant cost, both in man-hours and dollars. Although nobody can say for sure how much money is spent producing the reports each year, the last estimate made in 1993 projects it's somewhere in the neighborhood of $163 million. Combined with the fact that some of the reports are so narrowly focused (the Social Security Administration's report on printing operations) or outdated (The Post identified two required briefings on the long-since-dissolved Soviet Union), many in Washington are calling for an end to some of the more irrelevant or wasteful ones. In 2012, The White House compiled a list of 269 reports it wanted to eliminate; the House passed a bill recently that nixed 79 of them.
Although transparency and accountability are noble goals, the story in The Post shows that when it comes to government reporting requirements, there is a fine line between oversight and distraction.0 Comments | Post a Comment | Sign up for NTU Action Alerts