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The Obama Administration has stopped releasing Obamacare sign-up information since the month of May. They are reportedly nervous about releasing premium rates before the midterm elections. Daily Caller has the latest!
The Treasury Department released its quarterly list of Americans renouncing their citizenship. 2013 was a record high for U.S. expatriates and the trend still seems to be going up. According to Forbes, one of the reasons is because of the complex tax code and the requirement to file taxes even if you don’t work in the U.S.0 Comments | Post a Comment | Sign up for NTU Action Alerts
This is a follow-up to the earlier blog post, Corporate Inversion: Fleeing from the Terrifying Tax Code.
The fervor for inversion is not slowing down, especially now that Congress is in recess until September. With two bills left behind, H.R. 4679 in the House and S. 2360 in the Senate, Congress could address the issue during their short September session or in the subsequent lame duck session. While President Barack Obama and Treasury Secretary Jacob Lew condemn businesses as “unpatriotic” for trying to relocate, few policymakers attempt or even suggest specific comprehensive reforms to the tax code, despite admissions that the rate is the real problem. Instead, both bills retroactively change the IRS requirements for inversion to trap businesses in the U.S.
The high corporate tax rate reduces competitiveness for U.S. companies, causing many to analyze the costs and benefits of moving their headquarters abroad. Under the current law, some not-yet-incorporated, fledgling businesses will also decide that the U.S. is not an ideal country in which to open shop. The U.S. corporate income tax rate sits at 35 percent, considerably higher than the European Union average rate of 21.34 percent or the OECD average of 24.11 percent. Operating with at least a 10 percentage point tax advantage leaves foreign competitors with significantly more income for future investments, higher wages, or lower prices, with which U.S. companies struggle to compete.
With their additional expendable revenue, foreign corporations are increasingly viewing U.S. companies as valuable investments. They can buy U.S. competitors to take advantage of American resources and infrastructure, yet maintain their headquarters abroad. As a recent Wall Street Journal article reported, foreign businesses use their additional cash after paying taxes to outbid their U.S. counterparts trying to buy U.S.-based businesses. The article specifically cites a situation in which Emerson, a manufacturing and technology company based in St. Louis, attempted to acquire American Power Conversion (APC) in Rhode Island. Despite an offer of over $5 billion, France-based Schneider Electric outbid Emerson by about $1 billion, turning once-American APC into a French company.
Without true tax code reforms, Congress will continue to see erosion of its tax base. Congress’s misguided attempts to stop inversions could actually expedite the erosion by preventing new companies from incorporating in the U.S. President Obama has threatened unilateral action to stop inversions, but only comprehensive tax reform will rectify the problem that Congress has created with the complicated tax code.4 Comments | Post a Comment | Sign up for NTU Action Alerts
In honor of the economist Milton Friedman’s birthday, NTU Foundation once again opened up the polls to taxpayers across the country to see which fundamental tax system change they support. As many Americans know, Friedman was a supporter of tax reform in favor of broadening the base and increasing bureaucratic efficiency. This poll has become a tradition for Americans as NTU and Foundation continue to research the different revenue collecting proposals in Congress and state capitols. Taxpayers were given several different options to choose from:
What did taxpayers vote for this year? Over 170 people voted in our poll with half voicing their support for the FairTax. The Flat Tax came in second at 39 percent. Demand for a National Transaction Tax, Keeping the Current System, and a VAT fell into the single digits, similar to last year.
Thanks for everyone who voted in our poll this year! We will be doing more of these as Congress continues to propose alternatives and marginal changes to our current tax system.
Have a thought or question on the FairTax or any of the other options? Leave a comment below and our NTUF experts will get back to you!
* Email me if you want to see Rep. Wise's BillTally report from the 102nd Congress. NTUF has back to the 107th Congress online.0 Comments | Post a Comment | Sign up for NTU Action Alerts
Today's Taxpayers News!
The ongoing melodrama over corporate “inversions” may have pushed Walgreens to keep its headquarters here in the U.S. The Chicago based company was considering moving its headquarters to Switzerland. USA Today has the latest!
Staying on the subject, The Obama Administration is considering using executive action to prevent American companies moving overseas to pay less in U.S. taxes. Read here for more!0 Comments | Post a Comment | Sign up for NTU Action Alerts
What are the long-term implications of government spending, and how should policymakers reign in the current trend of unsustainable federal expenditures? Those questions were the focus of a recent event hosted by the Cato Institute, entitled Federal Budget Outlook: It’s Worse Than You Think, featuring Senator Ron Johnson (R-WI) and Cato’s Director of Tax Policy Studies Chris Edwards.
In FY 2013, the federal budget deficit was a staggering $680 billion, and expenditures topped $3.9 trillion. That pattern is projected to continue going forward, with some estimates showing current spending at 20.4 percent of GDP (projected to rise to 31.8 percent by 2040).
Edwards considered five categories of federal spending:
Despite recent deficit decreases, spending on subsidy and benefit programs are growing at an annual rate of 6.7 percent. This spending increase results from the proliferation of entitlement programs including: Social Security, Medicare, SNAP (food stamps), unemployment benefits, agricultural subsidies, refundable tax credits, and so forth. Below is a visual graphic demonstrating the aforementioned categories.
Edwards noted, “the U.S. Constitution does not create an open-ended role for the federal government to transfer wealth or aid to the states. Yet today those two activities account for about two-thirds of federal spending.”
Senator Johnson’s main argument was that reporting by the Congressional Budget Office (CBO) is fundamentally flawed, allowing an administration to mask the severity of fiscal crises. CBO typically sticks to a ten-year budget window, but Johnson contended that some fiscal scenarios warrant a thirty year window, especially as demographic changes like the aging of the baby boomer generation impact the long-term stability of Social Security, Medicare, and other federal entitlement programs. The Senator said that ultimately, these programs amount to “inter-generational theft.” A sense of urgency has not yet set in among lawmakers because CBO does not adequately report the long-term effects of current fiscal policy.
The speakers suggested that America can move towards budgetary solvency if it eliminates wasteful spending (those that cost more than the benefits they yield) and respects the 10th Amendment. They also suggested that policymakers should work towards reducing regulatory and bureaucratic inefficiencies that cost taxpayers time and money, and open the door to cronyism and abuse.
At the current spending rate, the deficit will soon be many, many trillions. Senator Johnson finished the talk by imploring, “Please, God, don’t tell Washington what comes after trillions.”
Thanks to Paul Bartow for drafting this post.0 Comments | Post a Comment | Sign up for NTU Action Alerts
Congress, You Ain’t Got To Go Home… - Speaking of Taxpayers, August 1
... But you got to get the heck up out of here. What's Congress bumbling on budgetary matters before they finally head home for August? Lois Lerner is back in the news with some not-nice words for taxpayers. Afghan reconstruction costs more than rebuilding Europe. More interns invade the podcast. Milton Friedman Day is over, your chance to win 50 bucks is not. Plus, the Outrage of the Week!0 Comments | Post a Comment | Sign up for NTU Action Alerts
Today's Taxpayer News!
The U.S. Senate passed a VA reform bill that will cost about $17 billion. Some Senators were dissatisfied that it was rushed through President Obama is expected to sign the bill.
Federal employees have been caught breaking the rules and watching all sorts of things during working hours of “boredom”. NTU’s Pete Sepp sees this unnecessary free time as taxpayer money being wasted. Fox News has the latest!0 Comments | Post a Comment | Sign up for NTU Action Alerts
Rarely is there a policy or legislation that doesn’t have a cute acronym to help legislators sell it to the public. The Foreign Account Tax Compliance Act is no different. FATCA is the stunted acronym for “fat cat,” a term used frequently by President Obama, when referencing the so-called rich eluding taxes. However, FATCA isn’t just about targeting cartoonish tax-eluding billionaires - it is already causing trouble for many making well-below seven figures.
According to the IRS if you are a US individual holding just over $50,000 in foreign financial assets on the last day of the tax year, you too will be under the scrutiny of FATCA. But it isn’t just US citizens who are facing the consequences.
The vague wording in FATCA is extending its reach beyond US “citizens” to US “persons.” According an article in The Economist, foreign banks and other financial institutions must choose between turning over information on clients who are “US persons” or handing 30 percent of all payments of US source income as well as gross proceeds from the sale of securities that they receive from America to the IRS. “US persons” not only includes citizens but also current and former green card holders and non-Americans with various personal and economic ties to the United States, such as marriage. Of those non-American citizens impacted, it appears that Canadians will be the most directly affected.
Take Ruth Anne Freeborn for example. After the passage of FATCA in 2010, Oklahoma born US citizen Freeborn had to choose “between country and family.” Freeborn has been living in Canada for over 30 years with her Canadian husband who receives an income of $51,000 a year as an electronics technician and is the sole income earner in the family. Despite her family’s modest income, Freeborn was fearful enough of FATCA’s overreach to renounce her US citizenship. Freeborn explained, “My decision was either to protect my Canadian spouse and child from this overreach or I could relinquish my US citizenship.”
It is unlikely Freeborn’s Canadian family will be alone in their decision. Many banks are giving their American associated customers the boot to avoid entanglement with FATCA. It may not be hard for Americans to choose their family’s financial wellbeing over their US citizenship. According to FATCA News “any Canadian holding a dual US-Canadian citizenship is a US person and will be impacted by the FATCA provisions. Individuals who have spent a large amount of time in the US are also considered US persons. Others include estates, trusts, US corporations and partnerships.” Even some Canadian “snowbirds” who travel to America for a small portion of the winter will be subject to FATCA.
This is just a small snapshot of the rifts FATCA could be creating across the world – either causing discomfort for anyone interacting with Americans, or making any U.S. “person” persona non grata abroad. If these experiences become more widespread, it seems more than just “fat cats” are getting a shave.1 Comments | Post a Comment | Sign up for NTU Action Alerts
Just a few weeks ago Washington, D.C. required tour guides to pay $200, pass an exam, and obtain licensure before giving tours around our nation's capital. However, this regulatory measure was recently overturned in favor of DC-area small-business owners, Bill Main and Tonia Edwards. The owners of the tour guide company, "Segs In The City," originally sued in 2010 to have the licensing system abolished on the basis of free speech. The recent decision is a major victory for Main and Edwards, but offers a glimpse into the much larger issue of economically challenging regulation.
Federal and state governments are constantly producing more "red-tape," and its creation often goes unnoticed until the regulation has taken a stranglehold on individuals and small-businesses. Unlike taxes, which usually have a direct and immediately visible effect, regulation often creeps into our daily lives without receiving the same scrutiny that taxation receives. This is a serious problem since regulatory laws have massive costs, measured in both time and money.
Cass Sunstein, former head of the White House Office of Information and Regulatory Affairs, was quoted in 2011 as saying there is no "tsunami" of regulation to worry about. Three years later, there may not be a tsunami but there is no doubt a rising tide. According to research by the Competitive Enterprise Institute (CEI), it costs Americans $1.863 trillion to comply with federal regulations in 2013, making U.S. regulatory costs higher than the GDPs of countries like Canada and Australia.
Since 1994, the U.S. has issued an average of more than 3,500 regulations a year, or about nine per day. Also, in 2013 the Federal Register contained 79,311 pages, the fourth highest total ever. The Register's two largest volumes were in 2010 and 2011, including the 81 major rules -- those that have a $100 billion impact or greater -- that the President has issued annually since he took office. This all adds up to make regulation cost $14,974 per household, or 23% of the average household income of $65,596.
CEI's report also includes an "Unconstitutionality Index." This is a ratio of regulations by federal agencies compared to the legislation passed by Congress and signed into law. In 2013, the ratio was 51-1, which means that there were 72 new laws and 3,659 new regulatory rules, or a new regulation every 2½ hours. Six federal agencies, including the Departments of Commerce, Treasury, Interior, Health and Human Services, and Transportation and the Environmental Protection Agency, account for 49.3 percent of these regulations. Many of the regulations these agencies create hit small-businesses the hardest. Firms with 20 or fewer employees pay an average of $10,585 per employee in regulatory costs, while firms with 500 or more pay an average of $7,755 per employee.
At a time when state and local economies are in dire need of job growth, and government budgets are strained for every single dollar, cutting "red tape" is a cheap, politically savvy way of raising much needed funds. This is an especially prudent choice for local governments, since complex federal laws like Dodd-Frank and the Affordable Care Act impose significant costs for consumers and employers throughout the country. With this in mind, taxpayers should pay close attention to regulations proposed at every level of government, which can have far-reaching economic impacts.
Special thanks to NTUF Research Associate Alex Eblen for authoring this post.0 Comments | Post a Comment | Sign up for NTU Action Alerts
Today's Taxpayers News!
The House Ways and Means Committee released November 2012 emails belonging to Lois Lerner. Lerner used derogatory terms to describe Republicans and Conservatives in the emails. Fox News has the latest!
Rep. Rosa DeLauro of Conn. introduced a national soda tax bill aimed at taxing sugary beverages. Similar measures at local levels will be brought up in November for the people to vote. Read here for more!0 Comments | Post a Comment | Sign up for NTU Action Alerts