America's independent, non-partisan advocate for overburdened taxpayers.

 

Blog Contributors

Brandon Arnold
Vice President of Government Affairs 

Dan Barrett
Research and Outreach Manager 

Melodie Bowler
Government Affairs Intern 

Demian Brady
Director of Research 

Christina DiSomma
Communications Intern 

Jihun Han
Communications Intern 

Timothy Howland
Creative Content Manager 

Samantha Jordan
Communications Intern 

Curtis Kalin
Communications Intern 

Ross Kaminsky
Blog Contributor 

David Keating
Blog Contributor 

Douglas Kellogg
Communications Manager 

Sharon Koss
Government Affairs Intern 

Michael Liguori
Government Affairs Intern 

Richard Lipman
Director of Development 

Joe Michalowski
Government Affairs Intern 

Diana Oprinescu
Communications Intern 

Austin Peters
Communications Intern 

Kristina Rasmussen
Blog Contributor 


Government Bytes

Export-Import Bank: A Bad Deal for Taxpayers
Posted By: Melodie Bowler - 08/19/14

If you haven’t heard about the Export-Import Bank, here’s a quick rundown of the basics:

  • Commonly called Ex-Im, the bank was established by executive order of President Franklin D. Roosevelt on February 2, 1934.
  • Ex-Im provides loans and loan guarantees to U.S. companies attempting to export and to foreign companies wanting to import U.S. goods.
  • If Congress does not reauthorize Ex-Im by the end of September, it will cease providing loans or loan guarantees. It would continue to service current loans.

While budget-neutral in theory and often on paper, this notion is perpetuated only through faulty accounting and misleading statistics. Let’s debunk some of the rumors running wild on Capitol Hill.

Myth

Fact

90 percent of Ex-Im loans go to small businesses.

Based on the number of loans, almost 90 percent did benefit small businesses in 2013 (according to the bank’s very inclusive definition of “small”). Based on the number of dollars loaned, the large majority of taxpayer-backed financing went to behemoth businesses. In fact, Congress requires 20 percent of the total dollar value of Ex-Im transactions to go to small businesses, but the bank has repeatedly failed to meet that number.

Ex-Im financing is necessary for American businesses to compete in the global market.

In 2013, Ex-Im financed only 1.6 percent of U.S. exports.

Ex-Im is a “self-sustaining agency” that returns profits to the Treasury.

Ex-Im uses faulty accounting procedures rather than fair value accounting to create an illusion of profits. The Congressional Budget Office estimates that Ex-Im costs taxpayers $200 million each year.

If we take a closer look at Ex-Im’s transactions, the bank’s financing becomes even more questionable. In many cases, large corporations benefitting from Ex-Im financing could have received loans from the private sector. In other instances, the Ex-Im-backed ventures were so risky that private lenders would not fund them. In either scenario, U.S. taxpayers should not be responsible for providing low-interest loans that are unnecessary or unlikely to be paid.

To demonstrate the true horror of what Ex-Im does with our money, the House Financial Services Committee created a blog series titled “Egregious Ex-Im Bank Deal of the Day.” Each weekday, the staff publishes another awful deal that Ex-Im decided was worthy of taxpayer funding. Remember Solyndra, the failed manufacturer of solar panels? After receiving $535 million from the stimulus package, Ex-Im officials decided the now-bankrupt company could use additional help, in the form of a $10.3 million loan guarantee for a foreign supermarket chain to buy Solyndra’s products. In a recent deal, the Australian Roy Hill Iron Ore project received a $694 million loan from Ex-Im after the private market refused to offer financing. Not only are Americans funding this without their consent to bear the risk, but the project will compete with U.S. mines, jeopardizing domestic jobs. Possibly the most egregious deal yet has been $4.975 billion in direct loans to assist building Sadara Chemical Company, a project of Saudi Aramco, the state-owned oil company of Saudi Arabia. If the Saudi Arabian government needs American exports for its pet project, they can likely finance those purchases without help from U.S. taxpayers.

If that weren’t enough reason to let Ex-Im’s authorization lapse, in addition, the bank’s transactions are fraught with bribery and cronyism. Abengoa International, a Spanish green-energy company, managed to receive about $150 million in total loans from Ex-Im, to no one’s surprise, since former governor of New Mexico Bill Richardson sat on the board for both the company and the bank. Four other Ex-Im officials are currently undergoing investigations of bribery and favoritism. While Ex-Im is financing growth for our foreign competitors, including Russia and Brazil, the U.S. continues to experience economic and employment hardships at home. Rather than risking taxpayers’ dollars for the benefit of other countries, it is time to let the Export-Import Bank expire.

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Taxpayers Already Fighting November Ballot Measures
Posted By: Lee Schalk - 08/18/14

As we head towards fall, debates regarding state and local November ballot measures are heating up. In many places, groups of citizen activists are organizing to push back against the threat of greater spending and higher taxes. In Georgia, the Cobb County Taxpayers Association (CTA) is one such group, speaking out against a Special Purpose Local Option Sales Tax (SPLOST) measure that is a shoe-in for the infamous “negative” rating in the 2014 edition of NTU’s Ballot Guide.

If passed, the measure would renew a one percent sales tax hike for six years. If thwarted, Cobb County taxpayers would see their sales tax rate drop to 5 percent, which would be the lowest rate in the region. As CTA points out, many counties in the Atlanta area have a rate of 7 percent, meaning that this SPLOST proposal’s defeat would greatly benefit Cobb County residents and businesses by helping to attract more retail activity.

If you’re a concerned taxpayer living in the area, you may want to keep tabs on CTA’s activities. They held an organizational meeting this past Saturday in Marietta and will continue to work to defeat the tax measure. More info can be found HERE. Additionally, be sure to keep an eye on NTU.org as we continue to weigh in on state and local ballot measures. In particular, stay tuned for the release of our annual Ballot Guide, which will be available in the fall.

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Administration Stonewalling Government Watchdogs
Posted By: Nan Swift - 08/18/14

The offices of Inspector General were created under the “Inspector General Act of 1978” to serve as internal watchdogs within federal agencies by conducting audits and investigations into programs, providing policy recommendations to “promote economy, efficiency, and effectiveness,” preventing fraud, and communicating administrative problems to Congress.  Since their inception, the Inspectors General (IG) have served an invaluable role for taxpayers by rooting out waste and increasing transparency. However, the important work of the IGs is being hindered by the Obama Administration according to a letter sent earlier this month from IGs across the federal government to members of the House Oversight and Government Reform Committee and the Senate Homeland Security and Government Affairs Committee.  NPR reports:

Forty-seven IGs signed a letter this month highlighting problems with access to federal records — problems they say slow their investigations and threaten their independence.

"If the IG community cannot rally around getting access to data, access to information, what can they rally around?" asks Brian Miller, who served as inspector general at the General Services Administration for nine years. "You know, this is, this is vital."

Miller says by failing to hand over documents and access to electronic databases, bureaucrats can deprive IGs of the fuel they need to do their work.

Taxpayers have real reason to be concerned at the news IGs aren’t receiving the support and access to information they need from the “most transparent administration in history.” Over the years, the important work of the IGs has been the source of critical information. Here’s just a small sample of what IGs have uncovered:

Just from the handful of cases above, it’s clear the IGs fulfill an essential role in ensuring tax dollars aren’t misused and federal programs are properly administrated. Best of all, unlike so many other government endeavors, taxpayers can be sure they are making a good investment when it comes to these vital people. A 2011 Government Accountability Office (GAO) report found that the savings IGs generated through their audits and investigations “represented an $18 return on every dollar invested in IGs.”

Of course, if IGs are finding it harder to do their jobs and obtain the information necessary to conduct thorough analyses, taxpayers will see less and less of that investment recouped and more and more waste across all agencies. Taxpayers will have to hope that Congress and the Administration can find a way to ensure our IGs can continue to be an effective tool that raises the bar for bureaucracy.

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Latest Taxpayer's Tab: Publicly Funded Art
Posted By: Michael Tasselmyer - 08/17/14

Taxpayer's Tab Update

Did you know that in 2002, taxpayers funded a $10,000 grant that went to support the Arctic Chamber Orchestra's tour through rural Alaska? The government agency that administered the funding is the National Endowment for the Arts, which was established in 1965 and received about $146 million in appropriations last year.

Congress has tried to defund the NEA before, and this week's edition of The Taxpayer's Tab features the latest version of such legislation, introduced by Representative Matt Salmon (R-AZ). H.R. 5090 was introduced as part of the Congressman's "Shrinking Our Spending" (SOS) initiative, and would prohibit any future funding of the NEA.

Also featured this week:

  • Most Expensive: Congressman Matt Cartwright (D-PA) and Congresswoman Rosa DeLauro (D-CT) introduced the VARIETY Act, which would refund 30 cents of every SNAP dollar used to purchase fresh fruits and vegetables in order to encourage healthier eating habits. H.R. 4904 would cost about $824 million per year.
  • Wildcard: Senator Chris Coons' Manufacturing Universities Act would offer additional federal funding to American colleges and universities that develop engineering programs with a special focus on manufacturing applications. S. 2719 would cost about $125 million per year.
  • Farewell, interns: NTUF had the pleasure of hosting 11 interns this summer, all of whom helped us research legislation and write about our findings. Find out more about them and our internship program!

You can read the latest issue of The Tab online.

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Linda Remeschatis, Owner of WisconsinMade - Speaking of Taxpayers, August 14
Posted By: Douglas Kellogg - 08/15/14

Pete & Doug have a great discussion on the potential havoc of an Internet tax scheme like Marketplace Fairness Act with small business owner Linda Remeschatis of WisconsinMade. A final pair of interns stop by to lend insight into NTUF's work - plus, the Outrage of the Week! 

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Phone Scam Claims More Than $5 Million From Taxpayers; President Obama’s Corporate Donors Involved in “Inversion” Deals - Late Edition, August 14
Posted By: Jihun Han - 08/14/14

Today's Taxpayer News! 

Fake IRS callers have called people demanding thousands of dollars in alleged unpaid taxes. A reported $5 million have been stolen from taxpayers in this scam based on 1,100 people. Read the IRS response here!

President Obama will not return money to his corporate donors that have practiced “inversions” which the President dubbed the practice as “unpatriotic”; via Bloomberg!

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Profiles in Liberty: Good Luck Summer Interns!
Posted By: Dan Barrett - 08/13/14

The Profiles in Liberty series has shown you some of the faces behind the work that makes up NTUF’s Taxpayers Tab newsletter, the Government Bytes blog, and the comprehensive BillTally project. Our interns agree that their experience working for NTUF this summer has been both informative and rewarding.

For many of our interns, this has been their first internship in the public policy field. NTUF is happy to have been able to introduce them to the intricacies of government spending through their research this summer and to prepare them to make informed decisions in their future jobs.

Our communications interns have had the opportunity to study taxpayer issues from all across the country as they write for Government Bytes and assist our communications staff. Sam Jordan has particularly enjoyed writing for the blog because it has kept her abreast of the latest current events and allowed her to expose government waste and federal inefficiencies. NTUF’s other communications intern, Jihun Han, who wants to pursue a career in broadcast journalism, has had the opportunity to edit several of NTUF’s podcasts over the course of the summer.  This, along with his research into news stories, has helped prepare him for an effective future in the media.

Creative Content Intern JR Ridley came to NTUF with some web and graphic design experience, and he hoped to develop his skills further. JR describes his work as “not so much an internship as a learning opportunity. No day is ever the same, whether I’m designing website graphics, meeting Congressmen researching bills, or having roundtable lunch discussions. It has been a diverse, unique, and ultimately fulfilling summer for me.”

NTUF’s research interns were very excited to be able to see some of the fruits of their labor from this summer. NTUF’s BillTally report was released in the middle of their internship, so they were able to see their research being published on the website.  Aside from seeing their work used in a meaningful way, our interns were working for a noble cause this summer. Kelly Hastings said it well: “I am motivated by the cause of protecting taxpayers from exploitation and promoting transparency in our government.”

The interns would like to thank NTU and NTUF staff for investing in us this summer. We feel that we have greatly benefited from our work experience and our discussions with you.  Thanks to you, the reader, for taking an interest in us and looking through our interviews. We greatly appreciate your contributions to NTUF’s cause.

Thanks to Catherine Fitzhugh for developing the Profiles in Liberty series and interviewing our interns.

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Senate Finance Committee Examines Impact of CHIP Tobacco Tax Hikes
Posted By: Michael Liguori - 08/13/14

 Recently, the Senate Finance Committee convened to discuss an important but often controversial topic: tobacco taxes.

Committee chairman Senator Ron Wyden opened the hearing by accusing the tobacco industry of tax evasion, citing  more than $2 billion in tax revenue that supposedly should have been raised since the Child Health Insurance Program Reauthorization Act (CHIPRA) was passed in 2009.

You might recall these measures as going against President Obama’s promise not to raise taxes on anyone making less than $250,000 per year.

CHIPRA provides health insurance for roughly 8 million uninsured children, and it has intended to fund this health insurance by ramping up excise taxes on tobacco products.

While taxes normally just burden and slow markets, the post-CHIPRA taxes are uneven; some products such as cigarettes, light cigars, and “roll-your-own” (RYO) tobacco are taxed at dramatically higher rates than pipe tobacco and large cigars.

Much of the alleged tax evasion Senator Wyden referred to is found in companies changing how they sell tobacco to take advantage of different tax rates. For example, the sale of pipe tobacco was ten times higher very soon after CHIPRA’s passage, and companies began adding grams of tobacco to light cigars in order to make them qualify as heavy cigars.

One of the underlying questions of the hearing was whether these actions qualify as “tax evasion” or “tax avoidance” as Senator Hatch put it. Arbitrary changes in taxation may just incentivize private firms in an unintended manner?

This question became more and more relevant as Senator Wyden pressed John Manfreda, Administrator of the Alcohol and Tobacco Tax and Trade Bureau (TTB), to explain why the TTB hadn’t enforced some of these cases of mislabeling, to which Manfreda responded that it simply isn’t the TTB’s jurisdiction to govern how private companies make their products.

Senator Wyden mentioned several times that tobacco companies were supposedly burdening American taxpayers, which is an odd accusation considering Congress started this process in the first place with ill-advised levy hikes.

Like other so-called “sin taxes,” high taxes on tobacco products hurt low-income Americans the most. But high cigarette taxes have also created a booming black market for smuggling..

Scott Drenkard of the Tax Foundation spoke of the “effective prohibition” on cigarettes in the most tax-heavy states; a situation that leads to smuggling and counterfeiting tobacco products.

Currently 57% of cigarettes in New York City, where a pack of smokes costs $14,are smuggled from different states, and one smuggler was found to be using the proceeds to fund the terrorist group Hezbollah. In addition the international trade of untested, unregulated counterfeit cigarettes is growing, with black markets like China’s producing 400 billion possibly dangerous cigarettes each year. 

As the hearing neared its conclusion, and the mass of information surrounding this issue became clearer, proposals were offered up.

Senators Wyden and Hatch pressured the TTB to begin enforcing taxes on these firms alleged to be guilty of evasion, while Dr. David Gootnick of the Government Accountability Office suggested making all taxes of all tobacco products equal. A third answer to the problem seems obvious, yet it was only really mentioned by the Tax Foundation’s Scott Drenkard: Why not follow historical principle and ease government restrictions on tobacco products? Why not simply lower taxes across the board? Tax parity would be the first step so that all products are equal in the eyes of the law.

When the market is restricted, dangerous black markets develop, and unpredictable negative externalities emerge. With the health effects of tobacco products well-known to the general public and warning labels on every pack of cigarettes, American consumers should be allowed to make their own decisions and buy these products free of excessive and confused taxes.

Politicians dealing with these challenges would also do well to learn of the unintended consequences of constantly relying on an “easy target” like cigarette taxes.

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Canadians Sue Over FATCA
Posted By: Samantha Jordan - 08/13/14

In a recent blog, The National Taxpayers Union Foundation speculated over potential snags in the United State’s close friendship with Canada over the overreach of the Foreign Account Tax Compliance Act. It appears after just one month since it’s enactment, US-Canadian ties are already being strained.

Since implementation on July 1, 2014, FATCA has cost Canada’s five biggest banks a combined $750 million in Canadian dollars ($687 million in US dollars) just in initial compliance expenses. American-Canadian dual citizens are already fed up. 

The Wall Street Journal explains US expatriates are taking legal action against the Canadian government for its role implementing FATCA. The lawsuit challenges that the Canada-US intergovernmental agreement violates provisions in the 1982 Canadian Charter of Rights and Freedoms which guarantees “life, liberty, and security of person; security against unreasonable search and seizure; and equal protection of law without discrimination.”

Additionally, the plaintiffs suggest that FATCA “goes against the principle ‘that Canada will not forfeit its sovereignty to a foreign state.” By forcing Canadian banks to share account information with the IRS via Canadian tax authorities, many would argue FATCA goes against the Canadian principle “that Canada will not forfeit its sovereignty to a foreign state.”

Given that a record, 1,577 US taxpayers gave up their passports or green cards in the first half of 2014, the US needs to ask if FATCA is worth risking our closest ally.

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Disability Insurance: The Alarming Underbelly of the Social Security Crisis
Posted By: Melodie Bowler - 08/13/14

On Monday, July 28th, the Social Security Administration released its annual trustees report, officially titled “The 2014 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds.”

Old-Age and Survivors Insurance (OASI) is commonly known as Social Security and is received by retirees or their immediate family after death. Disability insurance (DI) is also under the purview of Social Security but is received when someone is unable to work due to physical or mental disability.

In response to the release, the Committee for a Responsible Federal Budget held a panel discussion the following day, titled “Decoding the 2014 Social Security Trustees Report.”

Starting the discussion were Congressmen Tom Cole (R-OK) and John Delaney (D-MD).

At the end of May, they introduced H.R. 4786, the Social Security Commission Act of 2014. H.R. 4786 would create a 13-person Commission on Long Term Social Security Solvency. The commission would be chaired by a presidential appointee; the House and Senate each would choose six members, including two non-elected experts. For the commission to report its recommendations, it would need approval of at least nine participants, ensuring a bipartisan consensus. The Congressmen were enthusiastic about the prospect of creating this commission, but since its introduction, the bill has not moved. Everyone in the discussion agreed that progress will not continue until after the November elections.

Once the Congressmen left, the panelists began their examination of the report’s findings.

The combined Old-Age and Survivors Insurance and Federal Disability Insurance (OASDI) trust funds will be depleted in 2033. This prediction has not changed from last year’s report. Once depleted, 77 percent of total Social Security benefits will still be disbursed as revenue is continually deposited into the funds from payroll taxes.

Viewed separately, the OASI trust fund will run dry in 2034. The DI trust fund will empty in 2016 and will continue to pay just 81 percent of benefits. With disability insurance running very low very soon, the discussion steered toward solutions.

Unlike much of the federal government, the OASDI trust funds cannot borrow from outside sources to replace depleted revenue. One suggested solution is to borrow instead from the OASI fund to replenish the DI fund. This would be a short-term fix, and the almost insolvent DI fund would not be able to repay the loan to the OASI fund.

Another similar solution is to reallocate revenue from OASI to DI. Rather than a simple transfer from one fund into the other, politicians could change the portion of the social security payroll tax that benefits the two funds. Right now, the social security tax is 6.2 percent of income, with 5.3 percent funding OASI and the remaining 0.9 percent going to DI. Raising DI’s portion of the tax and lowering OASI’s portion would extend the solvency of the DI trust fund, but it would shorten the solvency timeline for the OASI trust fund.

Most of the panelists insisted that a truly long-term solution would include tax increases, benefit cuts, or both, which they did not describe in detail.

Many politicians and organizations have recognized the crisis facing Disability Insurance, but few have presented comprehensive plans to solve the problem. Last August, the Cato Institute published a policy analysis titled “The Rising Cost of Social Security Disability Insurance” to address exactly this issue.

Rather than raising taxes or putting the OASI trust fund in jeopardy, Cato recommends cutting costs drastically to save the DI trust fund. The analysis examines several ways to lower costs; the two paramount changes would be reducing benefits and enforcing stricter eligibility requirements. Regular reexamination of recipients would also result in significant savings. In the early 1980s when the Social Security Administration decided to reexamine DI beneficiaries, they found that 40 percent did not qualify to receive benefits. Cato recommends other small changes, but with these three together, Congress should be able to save Social Security Disability Insurance for those who really need help.

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