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Curtis Kalin
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Ross Kaminsky
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Joe Michalowski
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Diana Oprinescu
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Austin Peters
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Kristina Rasmussen
Blog Contributor 

Medicare and Medicaid

Florida’s 19th Special House Election: A Budgetary Guide
Posted By: Dan Barrett - 06/20/14

In what some are calling a quiet election, there’s still a lot to be said. Though the challenges of taking drug tests have largely been replaced with who can help create the most jobs in the next five months, before the next election for the same office, Florida residents are asking the same questions of candidates as they did in Florida’s other recent special House election: What will you do in Washington, D.C.? Especially in the wake of their last Congressman, Trey Radel, who resigned after being arrested for possession of cocaine.

In just a couple of short months, three front runners have emerged to battle for the 19th District’s seat: businessman Curt Clawson (R), businesswoman and former political activist April Freeman (D), and former health worker Ray Netherwood (L). Each candidate offers different general solutions to America’s fiscal ills but details have yet to come out about how each would actually change the federal budget. However, by using a methodology similar to National Taxpayers Union Foundation’s (NTUF) BillTally project, taxpayers can see where the candidates stand on at least some of the spending issues. For this brief study, we took direct quotes and campaign materials of candidates and matched them with budget and legislative data to see exactly what the differences and similarities are.

Similar to the New Jersey Special Senate and Florida’s 13th Special House elections, details were few and far between. Even with the campaigns releasing economic plans and platform summaries, we’re still left asking what will they do if elected as the House of Representative’s newest member?

Check out the entire line-by-line analysis of all three candidates. As with NTUF’s other BillTally and campaign studies, only changes in current spending are recorded (similar to the Congressional Budget Office). The reports do not include changes in revenues or costs outside the federal government. Below are summaries of each candidates’ proposals.

Curt Clawson (R) has proposed two (out of 12) quantifiable policies that NTUF was able to score. Combined, they would decrease annual spending by $395.8 billion. The largest budget-influencing item that he supports would cap federal expenditures at 19 percent of GDP, which would be implemented using the “Penny Plan,” which would cut spending by one percent each year as long as the budget is not balanced.

  • Block Grant Education Funds to States: Unknown
  • Continue Federal Flood Insurance Rates: Unknown
  • Create a Budget Cutting Committee: Unknown
  • Freeze Federal Employment: Unknown
  • Limit Federal Spending: $331.9 billion (savings)
  • Require Congressional Approval for Major Regulations: Unknown
  • Block Grant Medicaid Funds to States: Unknown
  • Eliminate Government Health Care Bureaucrats: Unknown
  • Protect Health Insurance Access for those with Pre-Existing Conditions: Unknown
  • Provide for Health Care Plans and Accounts: Unknown
  • Repeal the Patient Protection and Affordable Care Act: $63.9 billion
  • Restore Medicaid Advantage Funding: Unknown

April Freeman (D) has two (out of 12) policy items that NTUF could fiscally score. Together, they would increase spending by $20.203 billion each year for the next five years. Her largest quantifiable proposal would overhaul the immigration system.

  • Ensure Wage Equality: $3 million
  • Support Domestic Industries: Unknown
  • Support Teachers: Unknown
  • Ban Hydraulic Fracturing: Unknown
  • Expand Alternative Energy Sources: Unknown
  • Fully Fund Water Infrastructure Improvements: Unknown
  • Fight Human Trafficking: Unknown
  • Pass Immigration Reform: $20.2 billion
  • Protect Citizens’ Privacy: Unknown
  • Secure the Border: Unknown
  • Normalize Relations with Cuba: Unknown
  • Ensure Veterans’ Benefits: Unknown

Ray Netherwood (L) had one proposal that NTUF could identify. It would be to replace the current income-based tax system with a national sales tax, known as the Fair Tax. The measure would cut an average $19 billion in federal outlays for each of the next five years.

Normally, there would be some overlap between the candidates’ platforms. In the other Florida Special Election, the front runners supported increasing current spending by $180 million per year to delay a scheduled rate increase for the National Flood Insurance Program. That was not the case in this House race, although the three candidates were not asked similar questions when interviewed by the same source.

What does this mean for taxpayers and residents of the 19th District? It’s time for the campaigns to give Americans more details. While candidates are asking Floridians for their vote, taxpayers are asking for the roadmap of each candidate’s path to reach a better and expanding economy. As highlighted above and in the full report, the absence of budgetary facts and figures opens the possibility that all of the candidates could have much larger or smaller spending aspirations in mind. Clawson, Freeman, or Netherwood need only clarify their intentions with dollar figures to help complete this report and help educate Americans on important and pressing issues that we’re all facing.

Note: National Taxpayers Union Foundation is a 501(c)3 nonprofit organization. Our research efforts are intended only to educate Americans on how their tax dollars are being or will be spent by those in office, seeking office, or in appointed positions. For more information on NTUF go here.

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Infographic: Where We're at with the Debt Ceiling
Posted By: Dan Barrett - 10/04/13

As Congress continues to play budgetary chicken, prolonging the government shutdown, another debate is brewing that might or might not be fixed with a budget deal: the debt ceiling. The last time we came close to the federal borrowing limit, Congress pushed through the Budget Control Act, which put in place budget caps in exchange for an increase in how much debt the government can issue. However, BCA lacked any real entitlement reform and taxpayers are again looking at a divided and dysfunctional Congress as the debt ceiling deadline ticks down to zero. If the ceiling is not raised, the U.S. could default on our debt, sending shockwaves through the global economy. However, it might be the jump start that the U.S. needs to bring about true reforms and fiscal sanity.

To supplement this week's Taxpayer's Tab, NTUF compiled some information so that folks can get a read on where the government is at on the debt and how we got in this position (hint: entitlements).

Do you think the U.S. should raise the debt ceiling? If not, how would you get the country's finances back in order (especially because a default would likely lower our credit rating)?

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Ac-“customed” to Waste?
Posted By: Pete Sepp - 08/05/13

All too many federal agencies can be cited for having budgetary skeletons in their closet, and U.S. Customs and Border Protection (CBP) is no exception. From poorly managing a drone fleet purchase, to making questionable demands for more employees, CBP has raised fears for the security of taxpayers’ wallets in the past. Yet, Congress has an opportunity to ease future fears, over a controversial new CBP project, before it can cause a fiscal fright.

Two years ago, the U.S. Department of Homeland Security (DHS) concluded a letter of intent with the United Arab Emirates to build a “pre-clearance” facility at Abu Dhabi airport which would allow travelers to the U.S. to clear customs before arriving on American soil. So far, so good: pre-clearance can not only save time and reduce congestion at U.S. points of entry, it can also help ease the way for tourists who contribute to economic activity while visiting here.

Now for the not-so-good:

  • According to Airlines for America statistics, Abu Dhabi airport accounted for less than 600 passenger arrivals per day to the U.S. in 2012, ranking it #80 on the list of top origin points to our country.
  • Right now, no U.S.-based carriers even fly from the Abu Dhabi International Airport back to here.  All other CBP pre-clearance zones in Canada, Ireland, and the Caribbean serve many airlines, including U.S.-flagged ones.
  • The primary beneficiary of the deal would be Etihad Airways, the state-owned airline of UAE. Thanks to this status Etihad enjoys an advantage over private airlines around the world that are subject to corporate profit taxes of their home countries. Which brings us to …
  • Another advantage conferred by the United States under the auspices of the Export-Import Bank (Ex-Im), whose risk-taking and subsidization have long been a concern for taxpayer advocates such as NTU. Etihad snagged $593 million in loan guarantees from Ex-Im last year for aircraft purchases, and could qualify for preferential financing that our own airlines (by definition) can’t get through Ex-Im.
  • Meanwhile, The Wall Street Journal is reporting that over the preceding year (before overblown sequester scare tactics), the wait times for getting through customs at stateside airports have “increased dramatically.”

All these drawbacks lead to one long question: Given CBP’s service challenges at existing airports, is it really a good idea to plow ahead with a facility whose use will be comparatively scarce in the near term, and give another leg-up to an airline backed by its own government as well as ours, at the expense of an already overtaxed flying public?

And “overtaxed” is an understatement. As NTU has often noted, the typical overall government tax and fee burden of 20 percent on a $300 domestic airfare is higher than the average effective rate a middle-class American is likely to pay on his or her 1040 income tax return. International air travelers can have it even worse, with impositions such as separate departure and arrival taxes along with a passenger agricultural inspection fee (which the Obama Administration ill-advisedly considered raising in 2009) and a customs fee.

Proponents of the CBP station at Abu Dhabi argue that the investment of U.S. tax dollars will be minimal since UAE will pick up 85 percent of the project’s expense under the current agreement. But that’s little comfort to tax-weary travelers in America (see above), who remain worried that whatever share they will be forced to commit could escalate if construction or operating costs are not contained. Meanwhile, there’s that pesky matter of how best to apply CBP’s fee collections as well as appropriations from general funds – should they be used to expedite higher-priority passenger and cargo entry-exit services?

Many Members of Congress seem to think so. In June, the House of Representatives passed an amended FY 2014 DHS Appropriations Bill specifically blocking the Abu Dhabi pre-clearance scheme. In May, a bi-partisan group of 11 Senators echoed the sentiment of their House colleagues in a separate letter to DHS Secretary Janet Napolitano, questioning whether the agency’s “decision was made as a result of a risk based analysis.”

Alas, earlier this month DHS announced it was moving forward with a data-sharing agreement that could pave the way for the facility’s activation, even as it faces a concerted petition effort from interested industry groups with considerable clout.

Regardless of the politics involved, the taxpayer aspects of the issue deserve further exploration – that goes not only for the Abu Dhabi pact but also the ever-troubling direction of the Ex-Im Bank. Allowing the free market and fiscal responsibility to sort out needs from niceties would provide some badly-needed bone-rattling for those accustomed to budgetary business as usual in Washington.

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What is the Oregon Medicaid study and what does it mean for taxpayers?
Posted By: Douglas Kellogg - 05/15/13

The results of a unique study on Medicaid in Oregon published by the New England Journal of Medicine are flying around the health care policy community – and they carry significant weight for taxpayers.

For the first time ever a state held a lottery to determine a new pool of people who would be granted access to Medicaid. This special circumstance created two groups: those who ultimately won the lottery and participated in Medicaid, and those who did not. Economists tracked these groups and were able to make judgments on how Medicaid changed (or not) the lives of participants…

So what’s the bottom line?! The significant finding is that Medicaid made no real difference in the health of a person. At the end of the two-year study, both groups had essentially the same health outcomes.

This means Medicaid may amount to the world’s most expensive placebo.

The study essentially found that ‘financial stability’ was the only benefit of Medicaid. So, someone on Medicaid is only better off than someone not in the program because he/she doesn’t have to pay for health insurance.

With “Obamacare” pushing a Medicaid expansion estimated to cost taxpayers $800 billion, the results of this new study demand states exercise their power under the Supreme Court’s Affordable Care Act decision to refuse.

Otherwise, taxpayers will undergo a painful cash transplant procedure that deposits their hard-earned money in government coffers and results in no health benefits.

For just a couple ways to learn more about the study check out Forbes’ article, “Four Reasons Why The Oregon Medicaid Results Are Even Worse Than They Look”; and “EconTalk’s” interview on the subject.

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Obama's FY 2014 Budget on Medicare
Posted By: Dan Barrett - 04/09/13

In part two of three, I take a look at the predictions of the President's FY 2014 Budget in how it might affect Medicare. Note: Figures are in ten-year windows (not the usual five-year increments under the BillTally project).

Current status: Via the Centers on Medicare and Medicaid Services (CMS), health care costs for disabled and senior Americans will continue to rise, so much so that the program could be insolvent by 2027. From 3.7 percent of GDP in 2011, the Medicare Hospital Insurance and Supplementary Medical Insurance Trust Funds will continue to grow in obligations to approximately 6.7 percent of GDP by 2086 (73 years from now). We're talking trillions of dollars in projected obligations that traditional funding methods, a mix of payroll taxes and regular government spending.

Possibilities for FY 2014:

  • Combine Medicare Parts A and B (Unknown). By putting many Medicare services under one category, beneficiaries would apply to a single entity, creating something of a unified deductible, and potentially decrease administrative costs. However, there does not seem to be hard figures and, like other reforms, transitioning to a new system might erase potential savings. Also, Parts A and B are funded in different ways, with A receiving payroll taxes whereas B is mostly funded by Federal general tax revenue. Hopefully the Administration will provide details on merging A and B, if such a proposal is included in the Budget.
  • "Rebates" from Drug Companies ($100 billion). In the previous Budget, President Obama called for drug rebates from companies, which would require makers to give a portion of their sales to the government. Some would argue this is a new tax on businesses, the rebates have been classified as "offsetting receipts" and so count as decreases in public spending.
  • Cut Hospital Payments ($23.6 billion). The government will cut hospital reimbursements for uncollected "bad debt" from patients. The intention is to make hospitals be more aggressive in collected unpaid bills from patients instead of relying on government compensation. While the Fiscal Times credited the measure as a $36 billion ten-year savings, the Congressional Budget Office scored the payment reduction as a $23.6 billion cut.
  • Encourage Efficient Care (Unknown). Depending on this proposal’s intention, the government aims to have fewer hospital readmissions (patients who are re-emitted soon after they are released). However, this measure is already in progress via the Affordable Care Act.
  • More Means-Testing ($35 billion). Many higher-income patients would be required to pay higher premiums and deductibles for the same medical care as average or below-average income patients.
  • The FY 2013 Budget continued the costly "doc-fix" measure but also made cuts to graduate medical education credits, quality care requirements for rural hospitals, and changed a number of specialized medical procedures that would have resulted in savings, totaling a potential $302.4 billion.

Bottom line: Even if all of the savings realized, the structural problems of Medicare outweigh many proposals, even ambitious ones. Though streamlining payment processes and taking more money away from drug companies could help to offset some current deficits, taxpayers need trillion-dollar solutions to the economy’s biggest single expense program. On the other hand, by requiring drug companies to pay more to the government, prescription prices may increase.

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Obama's FY 2014 Budget on Medicaid
Posted By: Dan Barrett - 04/09/13

In this final post, I delve into what President Obama's FY 2014 Budget might do to Medicaid funding. Note: Figures are in ten-year windows (not the usual five-year increments under the BillTally project).

Program update: Using Congressional Budget Office data, the Kaiser Commission on Medicaid and the Uninsured projects an average eight percent spending increase for each of the next ten years, which is mostly due to the program’s expansion under the Affordable Care Act. Like Medicare, Medicaid costs are also expected to up-tick with many recipients getting older and requiring more costly care more often. So, in the short run, Medicaid and CHIP (the children's version of Medicaid) spending will increase by $638 billion before FY 2023.

What’s projected:

  • Eliminate Pay-For-Delay Drug Agreements ($753 million): Currently, drug companies are incentivized to pay generic drug makers to not reproduce their patented drugs for years at a time so that the company who created the drug gets compensated for research, development, and marketing costs. Possibly resulting in savings to Medicaid and even Medicare, President Obama would cut these agreements.
  • Expand Program Integrity (Unknown): In late 2012, the Government Accountability Office analyzed options for eliminating duplicative programs and improving efficiency under the Centers for Medicare and Medicaid Services (CMS). GAO found that an estimated $21.9 billion of Medicaid in FY 2011 expenditures were improper. Though the government should be fighting waste, fraud, and abuse, it is unclear how much more spending would be allocated to enhance integrity programs that are already in effect.
  • Empower the Independent Payment Advisory Board ($3.1 billion): Since its creation in 2010, IPAB has not yet made recommendations to change health care spending but CMS is tasked with starting IPAB’s work this year. In the past, the Congressional Budget Office has cited that the Board could save tax dollars but also said that the savings projections are "extremely" uncertain but maintains that the Board would save $3.1 billion over ten years.
  • The FY 2013 Budget called for the eventual reevaluation of payments made to Disproportionate Share Hospitals and a phased down provider tax credit threshold, among other smaller provisions. All told, these other measures could total $51.6 billion over ten years.

What this means: Given the Affordable Care Act’s broad expansion of Medicaid, it is difficult to say whether these reforms would mean real savings for taxpayers or if they could even stem the tide of high costs that are likely to occur. The Fiscal Times credited these three measures with a $25 billion savings but they are uncertain, conditional, and perhaps overly optimistic. Just as with Medicare, the full amount of savings do not make up for the projected growth in outlays and more fundamental reform (or revenue increases) are required.

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Sports Memorabilia and Health Care Reform
Posted By: Michael Tasselmyer - 10/25/12

An article published in the Bradenton Herald on Thursday highlights one of the interesting, if not unintended, consequences of the new Medicare taxes that the Patient Protection and Affordable Care Act is set to levy beginning in 2013.

Sports memorabilia enthusiasts may have noticed the recent surge of high-dollar collectibles flooding auction houses: Bobby Knight's NCAA Championship rings; Don Larsen's New York Yankees pinstripes; even Evander Holyfield's heavyweight boxing championship belts.

Perhaps not so coincidentally, these valuable items are hitting the auction market right before January 1st, when a new 3.8 percent Medicare tax on investment income will take effect for high-income individuals. As mentioned in the article:

"And starting Jan. 1, there will be a new Medicare tax on income from investments for higher-earning people. The IRS hasn't issued rules yet, so money from the sale of collectibles may be subject to the new levy. "The 3.8 percent Medicare tax would probably be the thing that immediately popped into my mind in terms of what folks may be thinking about," said David Boyle, Americas director of personal financial services for the accounting firm Ernst & Young."

Currently, income generated from collectibles held for more than a year is eligible to be taxed at a rate of 28 percent. So, if I'm a wealthy individual who bought Babe Ruth's 1920 uniform for $4.4 million and sold it a few years later for $5 million, I could owe 28 percent of the difference in capital gains taxes. With the PPACA's passage, that amount could increase by 3.8 percent beginning in 2013.

The new Medicare tax, combined with the possibility of Bush-era tax cuts expiring and the estate tax, apparently has some athletes and sports figures more closely examining the benefits of cashing in on their most sought-after mementos sooner rather than later.

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NTUF Release GOP Presidential Candidates Studies
Posted By:  - 04/26/12

In case you missed it...


Study of GOP Candidates’ Platforms Finds Romney Proposes Double Gingrich’s Budgetary Savings; Paul’s Blueprint for Cuts Dwarfs Others’ Plans

(Alexandria, VA)Mitt Romney’s spending cut agenda is twice as large as Newt Gingrich’s, while Ron Paul proposes double the reductions of his nearest challenger. Those are just some of the key findings of the National Taxpayers Union Foundation’s (NTUF’s) in-depth, line-by-line analysis of the 2012 GOP contenders’ federal budget proposals. NTUF has conducted studies of Presidential and Senatorial candidates’ fiscal policy platforms for more than a decade.

NTUF analyzed all of the candidates’ key proposals outlined on their websites, in their official campaign documents, and touted in speeches. By referencing these plans with equivalent bills in Congress, items in the federal budget, and a variety of other cost sources, NTUF builds a comprehensive picture of the bottom line impact of the candidates’ budget-focused proposals. Some cost estimates are based on NTUF’s BillTally system, which since 1991 has served as a resource on thousands of pieces of legislation introduced each year that could affect federal expenditures.

All told, NTUF identified 151 proposals among the four Republican Presidential office seekers with a potential impact on annual federal outlays. Ninety-four of those impacts could not be accurately determined, generally because the candidates failed to provide sufficient detail to pinpoint a cost.

2012 Republican Presidential Candidate Spending Analysis

Type of Proposal

Newt
Gingrich

Ron
Paul

Mitt
Romney

Rick
Santorum

Spending Increase

6

2

3

6

Spending Cut

6

6

11

16

Unknown Cost

27

13

28

27

TOTAL

39

21

42

49


Source:  National Taxpayers Union Foundation

According to NTUF, GOP frontrunner Mitt Romney’s platform would reduce federal outlays by a net of $353.0 billion annually, Newt Gingrich’s extensive policy plans would shed $146.2 billion from the budget, and Rick Santorum had $670.6 billion in cuts on his radar prior to ending his campaign. Ron Paul seeks $1.2 trillion in yearly net reductions.

2012 Republican Presidential Candidate Spending Analysis

(Dollar Amounts are in Billions)

Spending Category

Newt
Gingrich

Ron
Paul

Mitt
Romney

Rick
Santorum

Economy, Transportation & Infrastructure

-$4.565

-$4.565

-$4.3

-$4.565

Education, Science & Research

-$60.056

N/A

N/A

$0.144

Energy, Agriculture & Environment

-$40.561

-$5.953

Unknown

-$2.465

Federal Government Reform

Unknown

-$1,173.0

-$383.409

-$647.158

Health Care

-$41.155

-$40.235

-$136.098

-$42.655

Homeland Security & Law Enforcement

$0.120

Unknown

Unknown

$1.148

National Security & International Relations

$0.052

Unknown

$170.802

$30.591

Veterans

Unknown

$2.704

N/A

N/A

Miscellaneous

N/A

N/A

N/A

-$5.637

TOTAL

-$146.165

-$1,221.0

-$353.005

-$670.597


Note:  Totals may not add due to rounding.

Source:  National Taxpayers Union Foundation

Key findings include:

  • Romney's plans to reform the federal government -- including proposals to limit federal spending to 20 percent of GDP and to reduce the number of government workers over time -- would save taxpayers an estimated $383.4 billion per year. The area in which Romney would propose the largest budget increase is national security with a boost of $170.8 billion. (PDF version)
  • Ron Paul’s single largest savings item is his multi-pronged effort to balance the budget – at $1.078 trillion in reductions, it is a stark reminder of the size of the current federal budget deficit. (PDF version)
  • Newt Gingrich’s moon base plans would cost at least $4 billion per year. His vision for new rocket propulsion technology could not be quantified at this time. (PDF version)
  • Rick Santorum’s largest individual savings item was signing off on a version of a Balanced Budget Amendment to the Constitution, which would save $519.6 billion per year. A major assumption was that Santorum would abide by the terms of the Amendment he backed, which calls for limiting total federal expenditures to 18 percent of Gross Domestic Product. (PDF version)

“The field of candidates has often changed over the past year, but their ideas for federal spending and savings will continue to be debated as the campaign season evolves,” concluded NTUF’s Director of Congressional Analysis Jeff Dircksen. “Through it all, NTUF will be monitoring the candidates’ proposals – including those of President Obama – to inform the vital national conversation about the future direction of Washington’s fiscal policy.”

Note: The detailed NTUF analyses of Mitt Romney’s, Newt Gingrich’s, Ron Paul’s and Rick Santorum’s federal budget policy platforms are available online at www.ntu.org.

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NTU Campaign Warning About Medicare Part D Rebate Scheme Draws Ire, Misinformation, from Partisan Interests
Posted By: Douglas Kellogg - 12/01/11

It looks like a tax, smells like a tax, walks like a tax, but unfortunately Austin-American Statesman’s “PolitiFact” felt the need to reach an unfair opinion on an NTU-sponsored ad warning of a new Medicare Part D “rebate” scheme that was little more than a tax in disguise. Now, it seems local Democratic Party activists are actively using PolitiFact’s article, and some dubious assumptions and claims about NTU, in an effort to mislead their neighbors on the negative impact the Medicare Part D rebate tax would have.

First of all, key facts were left unmentioned in the PolitiFact piece. For example, the fact that the rebate program fits with the Joint Committee on Taxation’s definition of an excise tax, or that NTU provided PolitiFact with numerous references either describing the measure as a tax or demonstrating its economic harm. Convoluted policy workings of Washington bureaucrats may make reality hard to decipher: the bottom line is that no matter what you call it, a mandatory 23 percent burden is the price that real, live people will pay in many ways.

Now, Letters to the Editor are popping up in local papers, written primarily by Democratic activists. These letters range from simply relying on PolitiFact’s verdict, to incoherent rambling and strange conspiracy theories. However, some of the accusations must be cleared up: NTU has no coordination with any candidates, nor do these issue-focused advertisements imply any endorsement of individuals. Any wild claims about “front groups” are just that, and designed to distract from the details of the issue at hand.

Several months before the ad ran, NTU cautioned that a Part D “rebate” plan was among several “disastrous debt ideas” bouncing around the Supercommittee. Members of Congress had advocated this debacle before, and President Obama included a version of it in his own Supercommittee recommendations. So we felt compelled to sound the alarm in a Dallas Morning News ad and make certain citizens kept encouraging lawmakers who might be opposed to the plan.

But even though PolitiFact gave some space to NTU's case for calling this proposal a tax, and seemed to concede some of the other points we made, the staff nonetheless branded our ad “false,” claiming “Obama's urged rebate remains that--money paid in return for a purchase or action/opportunity. One would have to connect more dots to make it a tax.” Well, here are some of the many dots NTU connected that deserved more mention in the piece.

PolitiFact’s central claim: “Outside experts said they’d never heard the Medicaid rebates -- or proposed Medicare rebates -- referred to as taxes.”

Yet NTU provided plenty of such references: Joseph Antos of the American Enterprise Institute who served on the Maryland Health Services Cost Review Commission, Guy King, former Chief Actuary for Medicare and Medicaid, former CBO Director Douglas Holtz-Eakin, and Grace Marie-Turner of the Galen Institute. Antos, for example, noted that, “The so-called rebate isn’t a rebate at all. For a large number of Part D patients, it’s going to function as a tax.” Holtz-Eakin, along with Michael Ramlet, wrote, “In the end, not only will the cost of a new government rebate, like any tax, be borne somewhere else in the economy, but … seniors will also be forced to pay much higher premiums for their prescription drug plans.”

PolitiFact duly reported our contention that the "rebate" is based on a percentage of price-per-unit, a lot like the way some excise taxes on products such as certain tobacco items work. But here's the rest of the story. Calling the proposal "money paid in return for a purchase or action/opportunity," as PolitiFact does, is an inadequate explanation. That's because the rebate is levied on an ad valorem basis, not in exchange for a service. This is an important consideration: the "rebate" is on the sale of a specific product, using a specified value of the product. That is the basic definition of how an excise tax works. In fact the Joint Committee on Taxation describes an excise as such: "taxes imposed on a per unit or ad valorem (i.e., percentage of price) basis on the production, importation, or sale of a specific good or service.”

But aren’t taxes mandatory when this rebate isn’t? Not when Washington rigs the rules. As we told PolitiFact, federal and state government programs are capturing an increasingly dominant share of the prescription drug market (about 30 percent for Medicare and Medicaid, more when VA and government employee programs are added in). This has been especially true since the creation of the Medicare Part D benefit. It's one reason why we opposed the Part D program in the first place. For Congress and the White House to legislate more influence over drug-purchasing in the United States, and then say, "well, if you won't pay our latest kickback demands you can't sell in the empire we've created" is coercive.

Transparent political mud-slinging is unfortunate, but predictable when an organization seeks to shine the light of truth on a destructive policy that has been cleverly buried in a complex bureaucracy to prevent citizens from realizing that they are about to be hit with an unfair new burden. When the people implementing this destructive change are the types who profit politically by touting their uncompromising stewardship of the program, unseemly political tactics are unavoidable.

Throughout NTU's 40-plus year existence, one central part of our mission has been calling politicians to account when they create a plan that works and hurts like a tax, but refuse to call it a tax. Our effort against the 23 percent rebate is certainly not the last time we’ll be fulfilling that mission.

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Kicking Off the 2011 Election Season
Posted By: Brent Mead - 10/20/11

Even though it is still October, the fall election season is upon us. This Saturday, Louisiana kicks off a month of elections that will close on November 19th. In addition to the slate of candidates for local and state offices, voters in the Pelican State will also decide on five amendments to their constitution this weekend. As we do each year, NTU tracks these ballot measures in our General Election Ballot Guide in order to give taxpayers a better idea of what they are being asked to vote on.

The one measure with cause for concern is Amendment 1. From our ballot guide;

“Amendment 1 on the statewide ballot would redirect future tobacco settlement funds from the Millennium Fund to the Taylor Opportunity Program for Students (TOPS) scholarship. Additionally, the proposed amendment would permanently extend and place in the constitution a $.04 per pack cigarette tax set to expire next year.”

Generally speaking, state constitutions should be used to limit what kinds of taxation are allowed, and to set limits on the level of taxation. Rarely is the constitution used to set the specific rate. This measure would make it substantially more difficult for voters or the state legislature to reduce their tax burden in the future.

Furthermore, the Millennium Fund is Louisiana’s account to handle Tobacco Master Settlement Agreement (MSA) funds. The primary purpose of the MSA is to offset state Medicaid expenditures related to tobacco use. Amendment 1 would stop using future tobacco settlement payments for health care expenditures and redirect them to a wholly unrelated program. This gets away from the fundamental purpose of the MSA and taxpayers should be wary.

Fortunately, the remaining measures on the ballot are commendable efforts in fiscal responsibility. Amendment 2 would use one-time monies generated by natural resource development to start paying down the billions of dollars in unfunded state pension liabilities. Louisiana has roughly $9.5 billion in legacy obligations from its pre-1988 employee retirement plans. This amendment is an honest effort to meet those obligations without raising taxes. Amendment 3 creates a lockbox around the Patient Compensation Fund, so the legislature cannot raid it at will. Amendment 4, while somewhat confusing, simply sets some useful guidelines for refilling the state’s budget stabilization fund. The last measure is a technical correction.

As we say at the top of our guide, these off-year elections can too often be forgotten amidst the noise of the 2012 Presidential race, or even a classic SEC showdown. Bayou State taxpayers need to be on the lookout and hopefully NTU’s 2011 Ballot Guide can help.

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