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Latest Taxpayer's Tab: Defunding the NLRB
Posted By: Michael Tasselmyer - 04/27/14

Taxpayer's Tab Update

Student athletes on Northwestern University's football team recently voted on whether or not to unionize, an unprecedented move that could have far-reaching effects in the world of college athletics and how major schools' programs are financed. The decision that set the legal process in motion was made in February, after a Chicago branch of the National Labor Relations Board (NLRB) ruled in the players' favor and affirmed that the student athletescould be considered university employees.

In this week's edition of The Taxpayer's Tab, NTUF examined the role of the NLRB and a bill that proposes to strip away its federal funding. That bill -- H.R. 4379, introduced by Congressman Matt Salmon (R-AZ) -- would save $264 million, the total amount that the Office of Management and Budget says the NLRB will spend this year.

Also featured in this week's Tab:

  • Most Expensive: H.R. 4384/S. 2115, the America HEALS Act, would create a mandatory funding stream for various biomedical research programs, guaranteeing 5 percent growth in those areas every year. The bill was introduced by Congresswoman Anna Eshoo (D-CA) and Senator Dick Durbin (D-IL) and would cost about $11.5 billion per year on average over the next five years.
  • Wildcard: Congressman Reid Ribble (R-WI) introduced the Long-Term SCORE Act, which would create a new department within the Congressional Budget Office (CBO) dedicated exclusively to producing long-term cost estimates beyond the current 10-year standard. H.R. 4444 would require an additional $5 million per year.

Check out The Tab online for more on these bills and NTUF's other recent work.

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New Orleans Mayor Pushing Tax Hike Measures
Posted By: Lee Schalk - 04/24/14

New Orleans Mayor Mitch Landrieu is calling for three major tax hikes on his city’s residents, and the measures could end up on the November ballot if approved by the Legislature and signed by Governor Jindal.

A recent court ruling requires the Big Easy to address the underfunded firefighters’ pension fund. In response, New Orleans officials have pieced together the following proposals:

  • House Bill 1083: a 1.75 percent increase in hotel taxes meant to raise an additional $15 million per year.
  • House Bill 111: a 1 mill property tax hike on New Orleans residents that could result in an additional $5.6 million in revenue annually.
  • House Bill 1210: a 75 cents per pack cigarette tax increase in New Orleans with a projected revenue increase of $18 million a year.

If passed by the Legislature, signed by Jindal, and approved by taxpayers, the result would be an estimated new tax burden of $38.6 million on the citizens of New Orleans. Of course, each of these measures would receive the “negative” rating in NTU’s Ballot Guide, since they would negatively impact taxpayers. 

Whenever elected leaders toss around revenue estimates, taxpayers should be wary. Take cigarette tax hikes, for example.  According to a 2013 tobacco tax study by NTU’s research arm, revenue projections were met in only 29 of 101 cases where cigarette/tobacco taxes were increased between 2001 and 2011, meaning that 70 percent of the time, revenue estimates were missed. It’d be relatively easy for New Orleans residents and visitors to avoid the increase by buying their cigarettes elsewhere. As we’ve seen in other high-tax jurisdictions, it’s also possible that a new black market for cigarettes would find its way to Bourbon Street.

Once estimated revenues fail to materialize, it doesn’t take a rocket scientist to figure out what often happens next—more tax hikes! NTU Foundation’s study found that between fiscal years 2001 and 2011, 66 out of 96 tobacco tax increases were followed by additional tax hikes. This means that New Orleans could face even higher taxes (not necessarily on tobacco) if House Bill 1210 comes to fruition.

In order to address the city’s pension woes, Mayor Landrieu should look to limit spending and tighten the city budget before attempting to pile on new tax hikes. If these measures do make it to the November ballot, taxpayers will have a chance to reject the increases and demand that their Mayor run the city in a more fiscally responsible manner.

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President Obama Heads To Asia
Posted By: Michael Tasselmyer - 04/22/14

Today, President Obama will depart on his third international trip of the year, as he heads to Japan, South Korea, Malaysia, and the Philippines after making a public statement in Oso, Washington. The trip was originally scheduled to take place last fall, but the government shutdown in October prompted the White House to cancel.

The President will be away from D.C. until Tuesday, April 29, a total of 8 days spent traveling in and around the Southeast Asia region marked by several meetings with high-ranking foreign officials. According to the White House, the trip "will underscore a continued focus on the Asia-Pacific region and committment to his vision of rebalancing to the world's largest emerging region." The flight will take him from D.C. to Oso, then to Tokyo, Seoul, Kuala Lumpur, and finally, Manila. He'll head back to D.C. after that.

As our readers may know, NTUF keeps an ongoing log of Presidents' travel patterns, which we periodically update in order to provide taxpayers with a transparent accounting of how often the President travels abroad. Foreign travel is a necessary (albeit expensive) part of the job, yet there is a lack of readily available information for anyone who may be interested in how and when the President flies abroad. NTUF's study of these trends is offered in an attempt to fill in some of these gaps. We use information reported by the State Department combined with media and independent reports.

By our count, the President's 8-day trip to Asia will bring his cumulative totals to:

  • Days abroad: 133
  • Trips taken: 34
  • Countries visited: 73

In 2014, the President has spent 14 days traveling to and from 10 countries on 3 separate trips.

Last month, we issued an update on President Obama's travels through his first five years in office, which showed he has spent more time abroad than other modern Presidents. Additionally, the cost per flight hour for Air Force One -- basically, what it takes to operate and maintain the President's primary means of air travel -- has risen to over $228,000 per hour, up from about $180,000 in previous years. Assuming about 38 hours of flying time during the flights to and from the cities mentioned above (and a cruising speed of 575 mph), that means the flight costs alone on this latest trip could add up to over $8.6 million.

Presidential travel necessarily entails substantial planning, logistical support, security provisions -- and, therefore, presents significant costs for taxpayers. NTUF's 2013 update delves into many of these issues and what we do (and do not) know about them.

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"A Taxing Trend", & Tax Day Aftermath - Speaking of Taxpayers, April 18
Posted By: Douglas Kellogg - 04/22/14

Subscribe to NTU's podcast "Speaking of Taxpayers" via iTunes!

Pete & Doug examine NTU's study of tax complexity, "A Taxing Trend", which found a $224 billion cost due to 6.1 billion hours lost in complying with the tax code; as well as IRS online monitoring, and what to look for next year. Plus, the Outrage of the Week!

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Latest Taxpayers Tab: Minimum Wage Revisited
Posted By: Michael Tasselmyer - 04/20/14

Taxpayer's Tab Update

In the President's State of the Union address earlier this year, there was particular emphasis placed on the growing disparity between America's highest and lowest income earners. His speech made it clear that one of his top priorities would be to raise the federal minimum wage, with or without Congressional support -- and he followed through in February by raising the base hourly pay for federal contract workers via an executive order.

In this week's edition of The Taxpayer's Tab, NTUF examined one of the proposals to raise the federal minimum wage across the rest of the country, Senator Tom Harkin's (D-IA) Minimum Wage Fairness Act. S. 1737 would raise the minimum wage to $10.10 per hour within three years, and has picked up 39 cosponsors in the upper Chamber. The Congressional Budget Office (CBO) estimated that while the bill's provisions would lift some 500,000 workers above the poverty line, it could also cost as many as 1 million jobs in 2016. CBO's analysis shows the bill would increase federal spending by about $2 million over five years, and reduce revenues by $13.7 billion in that same time (largely because of an extension for certain small business tax deductions included in the text).

Also featured this week:

  • Most Expensive: Senator Ron Wyden (D-OR) introduced S. 2157, which would replace the controversial Medicare SGR physician payment system in favor of performance-based mechanisms (Congress has legislatively adjusted the current payment scale 17 times in the past 11 years). The Commonsense Medicare SGR Repeal and Beneficiary Access Improvement Act would, according to CBO, cost $66.5 billion over five years, or $13.3 billion per year on average.
  • Wildcard: Senator Mark Udall's (D-CO) Access to Consumer Energy Information (E-Access) Act would provide federal grants to local and state utility agencies to make their cost-accounting systems more transparent and readily accessible to customers. S. 2165 would cost $10 million, which NTUF assumes would be spent over a period of five years.

NTUF has also been in the news lately: our analysis on Congressional Caucus budget alternatives was featured at, and Real Clear Policy picked up Research and Outreach Manager Dan Barrett's piece on the "Neutral Tax".

For more on the bills above and other NTUF-related news, you can read the Tab online.

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Another Tax Day Gone...
Posted By: Douglas Kellogg - 04/17/14

“Man is a creature that can get used to anything.”

That’s Dostoyevsky, though he’s not the only person to express that sentiment.

After another tax season, as the federal government vacuums up record revenues while the economy sputters, that seems to be the appropriate theme. Though one might add, “especially if he cannot see or understand it.”

Last year I wrote on a few topics related to Tax Day and NTU’s study of tax complexity: A Taxing Trend. Unfortunately, from the challenges faced by overseas taxpayers, and the spike in the cost of tax complexity in the ‘10s, to the IRS tracking of your digital footprint, nothing has really changed.

There are more stories about the IRS’ monitoring of social media presences, overseas taxpayers still have to deal with FATCA, and we still lost north of $200 billion to tax complexity.

Though for the cost of tax complexity, that is quite noteworthy… This year the hour cost of tax complexity seems to have come down a bit, and, while that has brought the dollar cost down ever so slightly, that second figure has not come down much.

In fact, it is still in the stratosphere at $224 billion this past year. The charts illustrate how the dollar cost of tax complexity is, at best, very slow to react to the hour burden - and with more Obamacare measures still being implemented the dip may be short-lived.


The story is a familiar one as our tax code remains a huge burden, and the agency enforcing it looks for more ways to track your every move, but perhaps it’s not that much of a problem?

It might seem anathema to consider such a question, yet, the Associated Press asked whether filing taxes was truly difficult in a recent poll, headline: “Most Americans Say Filing Taxes Easy.”

How could something that is costing the economy 6.1 billion hours be “easy”? How could it take the average taxpayer 15 hours and $280 out of pocket to get it done? Maybe we just aren’t that bright.

Well the AP found that 58 percent of respondents thought filing a tax return was easy. Sad to say, that relief you’re feeling will be short lived.

The poll’s other findings undermine their own lead finding. First of all, they peg the number of taxpayers using assistance of some type (from Turbo Tax to an accountant) at 91 percent!

That’s right, practically everyone gets help with their taxes, and then claims filing them is “easy.” Something is amiss…

This is like saying changing your oil is easy because you take your car to Jiffy Lube. By this logic I have no problem flying a plane, just look how many times I’ve flown on airplanes! One could go on and on.

AP also needles simplicity by asking: “Would you be willing to pay more in federal taxes if the process of filling out a tax return were easier, or not?”

Of course only 7 percent of respondents said yes. It is very disappointing this loaded question was asked, as if paying more is somehow a feature of simplifying the tax code.

Maybe if they had told them how much they are losing just due to tax complexity those polled would have had some math to do.

This poll does show that the convenience tax filing products have brought to the table is now obscuring the true pain of complying with the tax code for almost everyone. We are all glad to have this arduous process made easier on us, but when you combine this situation with the real cost of tax complexity as shown by A Taxing Trend, you have the worst possible situation: A complex tax code that costs our economy billions, and remains hidden from view.

Similar to how automatic withholding and deficit spending can obfuscate what you pay in taxes, when everyone has help filing their taxes, the inefficiencies and burdens of the system are not clear to individuals.

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IRS Scandal Grows, Tax Simplification Poll, House Budget Breakdown with NTUF - Speaking of Taxpayers
Posted By: Douglas Kellogg - 04/14/14

Subscribe to NTU's podcast via iTunes!

NTUF's Dan Barrett joins the podcast to analyze all the budgets the House has been analyzing this week. Pete & Doug discuss all the smoke billowing from the IRS scandal, and an AP poll on the "ease" of filing taxes. Plus a smelly Outrage of the Week!

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A State-Based Federal Tax System?
Posted By: Dan Barrett - 04/14/14

If you’re following HBO’s Game of Thrones, winter’s always coming. The problem for taxpayers is that our winter comes every year in mid-April and it’s increasingly becoming a game with only losers. Around this time of year, I hear from citizens and even policy experts not only complaining about their tax burden but wondering why the system itself is in such dire straits. There are many reasons (NTUF recently laid out some of the problems and solutions in The Taxpayer’s Tab -- seriously, if you’re not subscribed to the Tab, you’re missing out) but some Americans see no hope for our graduated progressive-income tax system and are looking to completely replace it.

One such reform was pointed out to me by Tom, whom I met at NTU and Foundation’s CPAC 2014 booth. His idea is to streamline America’s tax system in a way similar to what the Founding Fathers originally created. I later found a short description of what Tom calls the Neutral Tax on his website:

[The Neutral Tax] eliminates all federal taxes on citizens and businesses (including federal income, payroll, personal income, unemployment, corporate, gift, estate, capital gains, alternative minimum, self-employment, gasoline, etc.) and replaces them with a singular flat tax on the gross revenue of each state government (including all local taxes & fees.)

In short, the new system would transfer the requirement of collecting federal revenues from individuals, households, businesses, and corporations to state governments. State governments tend to be more efficient in costs and accountability when collecting taxes because they are made up of much smaller jurisdictions than the entire country. Dealing with a smaller pool of people means lower operating and enforcement costs. Though there are still horror stories coming out of state Departments of Revenue, taxpayers are better able to walk down the street or travel to their state capitol to dispute their tax burden compared to traveling all the way to Washington, D.C. and/or dealing with examiners of a large and oftentimes cumbersome agency, such as the Internal Revenue Service (IRS).

The new system would take the responsibility of collecting taxes away from the federal government, leaving the states to decide the methods and parameters to tax citizens. Bringing the notion that states are laboratories for democracy into play, governments could choose to merely expand existing systems or choose to reform to collect the necessary funds. The goal is to allow states to have the freedom to reform their systems without having to also conform to the federal income tax-based framework. For example, today, taxpayers in Florida (and six other states) don’t pay state income taxes (and generally pay higher sales or use taxes) but still must pay federal income taxes. This system makes having a comparatively more efficient sales tax system less advantageous because people are a part of two systems. Having a Neutral Tax system might increase efficiencies by decreasing compliance costs for households and businesses. Of course, the tax system that states would adopt is all dependent on the Governor and state legislators.

With the basic concept out of the way, let’s delve down into what a Neutral Tax system might look like, how it would affect taxpayers, and how it might change the federal budget.

Calculating the Neutral Tax: As it appears in Tom’s document, the Neutral Tax would be revenue-neutral, meaning that the system would collect the same amount of revenue as before the fundamental reform. At the federal level, tax rates would be set at zero. Each state would calculate the state, local, and federal tax makeup of its citizens to determine how much it would need to increase its own collections to offset the federal income tax repeal.

For 2014, total projected federal revenue ($3.0 trillion) is divided by total tax revenue ($5.7 trillion – federal, state, and local total) to reveal that 52.6 percent of taxes paid go to the federal government. To be compliant in the new system, state revenue departments would need to increase average collections by 52.6 percent, which would not change the taxpayer’s tax burden (just the method of collection). It would be up to the Department of the Treasury and Congress to determine what percentage of the tax mix would go to federal accounts.

The Neutral Tax & Taxpayers: At least initially, taxpayers would likely not see a change in their tax burden. States would have the freedom to decide how to collect revenues and how much to collect, which would also leave it to state officials to decide who collects taxes. For example, it’s possible that one state could adopt a more progressive income tax while its neighbor could have a Fair Tax system.

The policy document also notes that “it cannot be argued The Neutral Tax inherently falls more heavily on one group or another. It will be up the states to determine how they modify their existing tax/fee structures to collect the additional federal tax… .”

A Different Federal Budget: Even with the same amount of revenue coming in, the Neutral Tax would not necessarily lead to similar spending levels. Enacting the new system would mean refundable tax credits would no longer be in effect. These credits are payments given to households in excess of their tax liability and are counted by both the Congressional Budget Office and NTUF’s BillTally project as spending, not revenues. Without these credits, federal spending would be reduced by $86.4 billion if the Neutral Tax was enacted this year. This line of reasoning is also found in our scores of the flat tax and Fair Tax proposals.

I took a similar view of the Neutral Tax as with the Fair Tax with respect to the IRS. With the elimination of most of the Tax Code, the IRS would be significantly downsized. The agency is approved to spend $12.1 billion this year, which would be counted as savings if the Neutral Tax is passed and the IRS is eliminated. BUT, a couple of further details: The IRS would need a multi-year wind-down to finalize remaining tax cases and to transfer data and authority to a smaller entity, comparable to the Treasury’s Alcohol and Tobacco Tax and Trade Bureau. They spend $96 million last year (page 1070 of the Budget Appendix) on operations and so I would credit that figure against the total IRS deauthorization.

Changes to FY 2014-2018 Federal Spending Under a Neutral Tax System
(in millions of dollars)

FY 2014
FY 2015
FY 2016
FY 2017
FY 2018
Repeal Refundable Tax Credits
IRS Wind-Down
Tax and Trade Bureau

Note: NTUF's BillTally system only tracks changes in budget outlays.

Much like other fundamental tax reform measures, this proposal also has a slim chance of passing a divided and pro-establishment Congress. In this proposed system, as with other reforms, the decision making power of how much to tax Americans rests with Congress and the Treasury Department. This then relies on individuals, local taxpayer associations, and national organizations to push for changes in the overall rate. It is difficult to tell if taxpayers would organize to keep rates low or if we could face a situation similar to today where rates are often times arbitrarily increased. However, it is good to keep the ideas coming for taxpayers to consider how best to fund the government in challenging economic times. Thanks to Tom for stopping by our CPAC booth and helping me add another alternative to the growing list of reforms!

Have an opinion of the Neutral Tax or another tax reform? Let us know in the comments.

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High-Frequency Trading and the "Transaction Tax"
Posted By: Michael Tasselmyer - 04/11/14

When most of us think of trading on the floor of the New York Stock Exchange, images of traders frantically running across the room as they take orders over the phone come to mind. Many Americans also trade at home, relying on internet services or financial advisors to relay the latest information on the stocks and funds that they're interested in.

However, there is growing concern that automated "high-frequency trading", which utilizes computer algorithms and software to make split-second decisions as trading conditions change in real-time, might give some traders an unfair advantage over others. The problem stems from the idea of marginal profit -- that is, even very small profits on minor trades can accumulate into larger ones so long as the trader conducts enough transactions. Software and computer algorithms are already capable of trading at exponentially higher speeds than the every-day financier, yet some firms spend hundreds of millions of dollars to cut down on communication time even further in order to get their hands on a stock first, then immediately resell it at a marginally higher price.

Author Michael Lewis has chronicled the debate in a recent book and several media appearances. The issue has gotten the attention of some lawmakers on Capitol Hill, too, who are pushing a national transaction tax in response. That tax would be levied on every financial transaction that investors make, which, according to Congressman Keith Ellison (D-MN), could serve as a deterrent for firms who are supposedly gaming the system by conducting thousands of small transactions at a time and rely on the very small marginal profits made on each one.

Ellison's idea -- which he has dubbed the "Inclusive Prosperity Act" -- attempts to counteract the effect of "Wall Street speculation" that "is currently subject to zero sales tax on its trillions of dollars of annual transactions- while consumers regularly pay sales taxes even on daily necessities." It has been proposed before in previous sessions of Congress.

NTUF featured an even broader transaction tax proposal in a 2012 edition of The Taxpayer’s Tab. Congressman Chaka Fattah's (D-PA) Debt Free America Act proposed to eliminate the personal income tax, virtually all tax credits, and the Alternative Minimum Tax and replace them with a one-percent fee on each and every cash, credit, debit, and stock or bond transaction. While it's unknown whether the bill would have any administrative costs associated with tracking every financial transaction Americans make, Rep. Fattah claims that his legislation will generate enough revenue to pay down the national debt in just ten years. Variations on that proposal include a 0.35 percent tax on all transactions, which proponents argue would simplify the current tax system and expand the revenue base.

Since our feature on Rep. Fattah's legislation, NTUF has offered a preview of other tax reform proposals -- including the Fair Tax and a flat tax -- that have been proposed in Congress. You can read our analysis here.

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Broad Coalition Sends Message to Congress: Oppose Internet Access Taxes
Posted By: Brandon Arnold - 04/11/14

NTU is proud to be among the 29 groups from across the political spectrum that signed a letter urging Congress to block potential tax hikes on Internet access. Specifically, the letter calls upon the House and Senate to pass the Permanent Internet Tax Freedom Act (H.R. 3086) or the Internet Tax Freedom Forever Act (S. 1431), bills that would make permanent the moratorium on multiple and discriminatory taxes on the Internet.  The current moratorium is scheduled to expire on November 1, 2014. 

As the letter explains:

Internet taxation affects all Americans from all political views and all walks of life. From healthcare to education, small business entrepreneurs to Fortune 500 companies, the Internet has dramatically transformed the way everyone lives, works, and learns. In 2010, the Internet accounted for an estimated $684 billion, or 4.7 percent of all U.S. economic activity. While the Internet was a nascent technology when the current moratorium was established in 1998, it has become the economic engine driving innovation and growth in our 21st century economy. Throttling that engine at a time when our economy is struggling hurts not only those trying to invest in America’s future, but also those who can least afford it and have the most to gain from the Internet’s potential.

Let’s hope Congress heeds the letter’s advice and works to reduce barriers to Internet access.

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