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Holiday shoppers will already be hit with a number of taxes on the presents they put under the tree this Christmas season. But if Congress has its way, they could be facing an additional tax on the tree itself.
A provision in the latest farm bill would institute a 15 cent tax on the sale of Christmas trees, which would fund a Christmas Tree Promotion Board, dedicated to encouraging tree sales and "enhanc[ing] the image of Christmas trees and the Christmas tree industry in the United States." The proposal is not a new one; in fact, NTUF has covered it twice before: once in 2011, and again earlier this year.
Although many were under the impression that the tax originated within the Obama administration, the Christmas tree industry itself pursued the fee through a regulatory process established by Congressional Republicans. The Federal Agriculture Improvement and Reform Act of 1996 enacted "checkoff" programs, which support within the agricultural industry functions similar to those seen in traditional labor unions. Checkoff funds for beef, dairy, eggs, and other products are funded by producers of those goods; the money is then used to promote and market their products, as well as conduct research on the industry's behalf. There are currently 19 different "checkoff" funds, for products as varied as processed raspberries, hass avocados, popcorn, and even softwood lumber.
Legislation was introduced earlier in the 113th Congress to establish a new "checkoff" fund for concrete masonry, as covered in the Taxpayer's Tab.0 Comments | Post a Comment | Sign up for NTU Action Alerts
Tax Hikes Will Dim Black Friday for Some States’ Shoppers
It’s almost Turkey time, and right after Thanksgiving many Americans will kick off the holiday shopping season with “Black Friday”; and, if not this week, soon enough even the biggest shopping procrastinators will have to scrounge up something for Mom and Dad.
For many of those generous gift-buyers the state will be taking home a more significant portion of their expenses this holiday season thanks to sales and gas tax hikes.
Three states just couldn’t manage to find a way to cut spending, and instead raised sales taxes; and ten states and the District of Columbia hiked up their gas tax rates.
California took home the crown for highest statewide sales tax rate as they rocketed their rate to 7.5 percent. More surprisingly Arkansas (up to 6.5 percent) and Virginia (up to 5.3 percent) also saw increases.
For most people shopping means driving, or having something shipped that makes somebody else drive. So the second state-level tax that will have some unpleasant surprises for citizens (and Amazon) is the gas tax.
Adding to this bane of commuters, shoppers, and taxpayers, were California (new state motto: “Bring Money”), Wyoming, Nebraska, Michigan, Indiana, Kentucky, Massachusetts, Connecticut, Maryland, and the District of Columbia.
For residents of these states Black Friday will seem a little bit darker this year. Is your state playing the Grinch this holiday season?
Source: Tax Foundation:0 Comments | Post a Comment | Sign up for NTU Action Alerts
The Myth of the 12.6 Percent Effective Corporate Tax Rate
A May 2013 report by the Government Accountability Office (GAO) claimed that U.S. corporations paid an effective tax rate of just 12.6 percent - a startling revelation considering the U.S. now has the highest statutory corporate tax rate in the world at 35 percent. As a wary taxpayer might expect however, there is more to the story…
The GAO study was used by many to bolster the notion that tax loopholes and offshore “tricks” allowed American businesses to duck a great deal of their tax burden. The party for those seizing on this opportunity was short-lived, however, as a more complete analysis performed by international tax expert Andrew B. Lyon (with Pricewaterhouse Coopers ) showed real and significant problems with GAO’s analysis.
Lyon’s study, published in the academic journal Tax Notes last month, exposed glaring omissions that skewed GAO’s baseline finding. Most evident was GAO’s use of just the year 2010 in their analysis. In making their judgment, they selected a narrow window of time that that just happened to coincide with loss write-offs resulting from several years of the Great Recession. Lyon took a more comprehensive approach, breaking down the corporate rate from 2004-2010. His finding was that long-term, “The effective tax rate based on worldwide current tax payments for all U.S. corporations exceeded 35 percent for the 2004-2010 period.”
What’s more, Lyon’s more comprehensive methodology found that even during the limited period GAO examined, effective corporate income tax rates well exceeded the 12.6 percent reported by GAO, largely because the agency failed to account for taxes paid to foreign governments on certain income dividends received by American companies.
An effective tax rate of 35 percent ranks highest among industrialized nations and has America lagging behind in terms of tax competitiveness. With unemployment in particular remaining a challenge for the U.S., it is important for policymakers to clearly understand the damage a punitive corporate income tax rate causes our economy. Taxpayers should not be fooled into a false choice using false facts. How the GAO could issue such a flawed study is another question…
Andrew Lyon’s very in-depth study is highly recommended for those looking to dive deeper into this discussion, read it HERE.
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Back in April, NTUF devoted coverage in the Taxpayer's Tab to H.R. 1686, a bill by Rep. Jim Moran (D-VA) that would impose a five-cent tax on every disposable paper or plastic bag that grocers and other retailers issue to customers. The proposal -- known as the Trash Reduction Act of 2013 -- was introduced to coincide with Earth Day, and was designed to incentivize shoppers to switch to reusable bags instead of single-use varieties that wind up in landfills across the country.
The legislation would generate plenty of revenue: in a press release, Rep. Moran's office cited figures from 2009 that showed Americans use over 102 billion plastic bags per year. However, that money would be directed towards new environmental spending to the tune of $4.08 billion.
The bag tax proposal isn't new. In fact, Moran based his legislation on an existing law in Washington, D.C., a city not far removed from his own Congressional district that encompasses parts of Northern Virginia.
Now, the bag tax has made its way overseas to the United Kingdom, and while many consumers may already be weary of new taxes and regulations, emerging research shows that this new initiative could actually make some Brits physically ill.
The Telegraph reports on a study from Aberdeen University in Scotland that warns the tax could result in more outbreaks of sickness from E. Coli and other food-borne bacteria, due largely to the high risk of contamination in reusable bags. "We have to be careful about being too strict in forcing people to re-use bags. ... There are some bags you should only use once, so I would be very unhappy at having a 5p charge on bags that are being used for food," said Professor Hugh Pennington.
Bacteriologist Kofi Aidoo echoed Pennington's concerns: "If people are going to have to pay for bags and re-use them my concern is we're creating a high risk of food poisoning. At the very least people have to be given advice to clean these bags every time they use them."
The UK study seems to be supported by research from UPenn, in which scientists observed a 25 percent increase in hospital admissions for bacterial infections (including E. Coli) after San Francisco banned plastic bags from certain stores.
The findings suggest an unintended, potentially hazardous consequence of environmental regulations that public officials will undoubtedly have to address should they decide to move forward with new or existing bag tax laws.0 Comments | Post a Comment | Sign up for NTU Action Alerts
Illinois Court Strikes Down Internet Sales Tax Bill
It’s not often that one hears good news for taxpayers coming from Illinois. Today is an exception, when the state’s Supreme Court ruled 6 to 1 that the 2011 Main Street Fairness Act was unconstitutional. The opinion is available here.
For anyone unfamiliar with the story unfolding in Illinois, our friends at the Illinois Public Policy Institute summed up the legislation this way:
In 2011, Illinois Gov. Pat Quinn signed the Main Street Fairness Act that required out-of-state online retailers such as Amazon.com to collect and remit sales taxes on purchases destined for Illinois if the online retailer had arrangements with Illinois-based marketing affiliates. These are typically coupon or deal websites, whose operators earn commissions for driving shopping traffic to an online retailer.
To avoid triggering the sales tax, out-of-state online retailers simply dropped their Illinois marketing affiliates, driving thousands of Internet startup entrepreneurs, many in Chicagoland, either out of business or out of state, some never to return again.
… Quinn’s online sales tax stopped this emerging sector in its tracks. The small, up-and-coming Internet entrepreneurs got hammered by their own Illinois government. Overnight, the state became less competitive in e-commerce, the future of business, communications and entertainment.
Be sure to read the whole thing here.
The immediate drop in online commerce and entrepreneurship is just one of the many negative consequences NTU and our allies fear should the federal Marketplace “Fairness” Act or other internet sales tax schemes move forward. If states are truly the laboratories of democracy, it’s safe to say that this is one experiment other states shouldn’t try.
Today’s opinion illustrates just how far from “fair” the internet sales tax gambit really is. Proponents of the legislation at the state and federal levels repeatedly argue that the government needs to “level the playing field” between brick-and-mortar and online retailers. But as the Court explains, such laws have the effect of creating even more, unconstitutional disparities, in this case, between online and traditional offline advertisers.
The Tax Foundation explains further:
… the law is broad enough that it could be read to sweep all paid-per-click advertising activity. So if you pay for advertising by the view, you have no obligation, but if you pay for advertising by the sale (performance marketing), you do.
Most of the legal challenges to these laws have focused on whether the state power exceeds constitutional limits under the Commerce Clause, but the Illinois Supreme Court focused on this disparity between Internet advertisers and traditional advertisers. Ultimately, the court concluded that because the law requires Internet-based performance marketers to collect tax, but does not require that of traditional performance marketers, it is a discriminatory tax on Internet-based commerce in violation of the federal Internet Tax Freedom Act…
NTU has long pointed out that bills like S.743 or H.R. 684 would be better titled the Marketplace Un-Fairness Act. Burdening online retailers, many of them small businesses, with even more regulations and compliance hurdles than brick-and-mortar stores isn’t leveling the playing field – it’s using the government to drive your competitors out of business.
Luckily, as the Illinois Supreme Court upheld today, these kinds of discriminatory shenanigans are unconstitutional. Let’s hope that legislators in Washington are paying attention.
Click here to learn more about this issue.
Click here to tell your Representative and Senators to oppose unconstitutional internet sales tax schemes.
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Jimi Hendrix, The Doors, The Who, Miles Davis, The Grateful Dead: these are just some of the names of artists who have graced the stage at San Francisco's legendary Fillmore Auditorium.
So when music promotion company Live Nation announced plans to expand the venue's brand to Silver Spring -- a Maryland suburb just outside of Washington, D.C. -- music fans were excited about the prospect of attracting more regional and national talent to the mid-Atlantic. As part of a deal to secure $11 million in taxpayer funding to build and operate the venue, Live Nation and Montgomery County government agreed to host at least 72 free or reduced-price events for the local community.
To date, the venue has only hosted one such event and Live Nation has yet to agree on the specifics of an annual charity event the venue is supposed to host. The venue has hosted over 300 events since it opened in 2011.
Additionally, County officials are entitled to six free tickets to every event that the Fillmore hosts, a perk that's added up to over $20,000 in free admission for Montgomery County government employees.
As the Washington Post reports, Maryland and Montgomery County governments pledged $8 million to make the venue plans a reality, in the hopes that it would provide an economic boost to the downtown Silver Spring area. However, the costs turned out to be higher by the end of construction, and taxpayers in Maryland ultimately ended up contributing $11.2 million to the project. In exchange, Live Nation pays Montgomery County $90,000 per month for the first five years of the venue's existence (less than half the total taxpayer funding) and agreed to host 3 free or subsidized events per month -- 36 per year -- for local community groups and charities. Since the venue opened, 72 of these events should have taken place under the lease terms, but as mentioned, only one has actually come to fruition.
Live Nation has claimed it's Montgomery County's responsibility to coordinate the free and subsidized shows, but locals have expressed frustration in the length of time it's taken promoters and government officials to host just one. Unfortunately, taxpayers have footed the bill for a significant portion of Live Nation's construction costs (as well as government officials' free tickets to their events) in exchange for benefits that have yet to be delivered, providing more reason for taxpayers to be wary of private-public partnerships that depend on such agreements.0 Comments | Post a Comment | Sign up for NTU Action Alerts
On Friday, NTU Foundation sent out the latest edition of The Taxpayer's Tab -- a weekly update of BillTally research -- and we got quite a few replies from Tab subscribers. Below is a selection of those responses and some further detail:
"[DC Statehood] looks like another money pit that should be avoided. If Congress does anything it should be the least expensive fix." – Stephen F
If D.C. was made a full-fledged state, federal spending could technically go down. How? The District government would be given the authority to levy taxes on residents and consumers, which would go towards city operating budgets and require less federal tax dollars. This, of course, assumes that the D.C. and federal governments would react to the new tax scheme by balancing spending in a revenue-neutral way.
In regards to the "least expensive fix" to the question of D.C. statehood vs. territorial rights, there are a couple of ways to look at it. NTUF's BillTally project only tracks proposed changes in federal spending, so, if D.C. was made a regular territory, like Puerto Rico or Guam, residents would not pay the full federal income tax. This would result in lower tax revenues. On the other hand, by making D.C. a state, the federal government would spend less direct money on the city and switch to transfer payments, like Medicaid matching funds. From our analysis, we assume that making D.C. a state would ultimately lead to more spending.
"The main reason for not granting statehood to Washington, D.C. is that our seat of national government would be subject to a single state, i.e. New Columbia, instead of retaining power over a small (10 square miles), exceedingly vocal population of 750,000 who continue to demonstrate their incapability to govern their own potholes, education system, and parking maze of signs. Anyone who has worked or lived there knows firsthand." – Larry K
We alluded to a situation in 1783 where unpaid soldiers besieged Congress in Philadelphia and the city did not prevent or break up the so-called Pennsylvania Mutiny. James Madison later argued that a national government would need a federalized city to have the authority to guarantee its own safety. However, when it comes to the District maintaining local infrastructure and education, it is a complicated issue. One argument is that the District should be able to exert more local control to spend money on targeted projects/improvements, either as a state or a city government with more autonomy. Others side with the Constitution, thinking that if Congress thinks it can help run a country, it ought to be able to properly operate a city.
"[DC Statehood] is extremely interesting from a Constitutional viewpoint and also a historical viewpoint ... BUT it would certainly bring about more Democratic Senators (2) and 2 more Democratic Congressmen. I say, let's move the capitol to northwestern Kansas (where it gets pretty chilly and snowy in the winter and subject to tornadoes in the warmer months). There is also the lingering question about Puerto Rico as well." – Red M
Looking at legislation introduced so far in the 113th Congress, I haven't seen any bill that would move the nation's capitol across the country. But a few things to consider if you’d want to do that. Rural Kansas does not have anywhere close to the infrastructure that could support all the government offices that would be required there (think Congress, the President, support personnel for them and cabinet agencies, and protection), not to mention the day-to-day private economy like food sellers, construction workers, and housing. To accomplish a move, you would have to have a massive government spending increase. One other point, by moving out to Kansas, are you anticipating any future D.C. Representative or Senator to lean Republican? If so, how do you justify such a move to those on the other side of the aisle?
"I'm opposed to them having Senators or statehood as such but I’m ok with them having a Representative based on their population." – John D
Depending on your exact intensions, John D, it still does not solve the current problem. Washington D.C. residents do not live in a state and so are not represented in Congress BUT, unless all of the U.S.'s territories and protectorates, those same residents are required to pay federal income taxes. This is where the "Taxation Without Representation" argument gains ground. So the possible solutions, at least highlighted in the latest Taxpayer's Tab, include expanding local D.C. autonomy, granting statehood or making D.C. apart of Maryland, or (as a quick technical fix) exempting D.C. residents from federal income taxes.
"I think Congress should retrocede the District back to Maryland." – Elsie G
An interesting idea, Elsie G. This would avoid granting D.C. statehood while giving local residents proper representation and taxation. However, as mentioned above, there remains the question of having Congress guarantee its own safety. If D.C. is retroceded back to Maryland, it is unclear whether or not Congress could do that. Now, there have been proposals to give all D.C. land back to Maryland except for the inner core, which Congress would still oversee. This alternative would help most residents gain representation by becoming Maryland citizens but what happens to those living right near Capitol Hill?
Thank you to everyone who replies to the Tab each week with what they think Congress should do, either in regards to a particular piece of legislation or how to resolve a challenge facing our nation.
Not in the inner circle of Tab subscribers? Go here and join in the discussion! Otherwise, if you have something you'd like for NTU Foundation researchers to know about (federal spending, budgets, & regulations), email us at email@example.com Comments | Post a Comment | Sign up for NTU Action Alerts
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Pete & Doug discuss NTUF's "10 Most Mind-Boggling Taxes" list with author Austin Peters, NTU VP Brandon Arnold stops by to talk about his Washington Times op-ed advising the GOP to protect spending caps, and the Outrage of the Week!
Is there anything more confounding than someone who doesn’t think we are over taxed? While it may initially seem impossible for an individual to be so oblivious, the world does not have tax ‘price tags’ posted on everything to remind you.
Demonstrating the breakdown of who pays the burden of income taxes, for example, is clearly important – yet, sometimes it’s better to focus on the smaller, widespread, tax burdens we all face. After all, nobody is able to avoid the burden of government.
To that aim, we put together this collection of the “Top 10 Most Mind-Boggling Taxes,” perhaps your city or state has made the list!
10. Fountain Soda (Chicago)
In Chicago there is big difference if you are drinking out of a can or a fountain; if it’s the former, the additional tax is 3 percent while the latter is taxed at 9 percent. Around for over a decade, this tax aims to curb obesity by making the usually larger fountain sodas more expensive to purchase.
9. Blueberries (Maine)
Maine produces 99 percent of the blueberries picked wildly in the nation. They also slap a one-and-a-half cent tax per pound on anyone growing, handling, processing, selling or purchasing blueberries. For what it’s worth, this tax is one of the oldest on our list: blueberry harvesters have been paying this tax since 1945.
8. Tan Tax (United States)
This infamous piece of “Obamacare” is a 10 percent federal tax on tanning bed services. Arguably attempting to discourage the using of these bed services, the tax does not apply to spray on services. For those who were hoping the “temporary” tax would be removed, the tax was made permanent in 2010.
7. Tattoos (Arkansas)
While this tax seems like it should be a relic of a different era, Arkansas implemented this 6 percent tax on permanent body art in 2005. If this incentivizes you to opt for that piercing you have been eyeing instead, you’re out of luck there too; body piercings and electrolysis are included .
6. A New Kind of Death Tax (Seattle)
Starting in 2011, it began to cost more for handling a death in Seattle. In addition to any estate tax you may face, it costs $50.00 to report a death to the Medical Examiner’s Office. If you don’t pay up, you won’t receive the necessary paper work for burial or cremation.
5. “Bagel” Tax (New York)
Was that bagel you’re eating sliced when you received it? If so, New York considers it a prepared food and adds an eight-cent tax to the bill. On the books for quite a while, New York took the step to start enforcing the tax in 2010, enraging New Yorkers and bagel store owners in particular. While eight pennies may not seem like a huge increase, one store owner is reporting he owes thousands of dollars in back taxes as a result!
4. Tethered Hot Air Balloon Rides (Kansas)
Going hot air balloon riding in Kansas? Well, if you’re scared to be blown away to OZ and opt to have your balloon tethered to the ground, then you are subject to local amusement park ride taxes. However, if you take a ride on the wild side and your hot air balloon ride is determined to be “untethered, piloted, and travels for some distance downwind of the launching point”, then you are considered to be partaking in air commerce and consequently your ride not subject to the tax.
3. Playing Card Tax (Alabama)
Beginning in 2004, Alabama imposes a 10-cent tax on each deck of cards that contains up to 54 cards. In addition, if you wish to sell a deck of cards, make sure you purchase your playing card privilege license before you do so.
2. “Luxury” Coffee Lids (Colorado)
In March 2010 Colorado eliminated a tax protection for “non-essential” packaging for food and drinks bought at restaurants and convenience stores. The move led to several interesting classifications including coffee cups being deemed essential while coffee lids were determined to not be. As a consequence, coffee shops are subject to (and, therefore, coffee drinkers must pay) a 2.9 percent luxury item tax on sleeves and lids.
1. The Non-Governmental “Jock Tax” (Tennessee)
This $2,500 per-game tax (max 3 games) tops the list despite not being quite as obviously strange as the other taxes. That’s because despite many states having so-called “jock taxes,” this is the only tax on the list where the money does not even go to the government – rather it heads to stadium owners who likely already benefitted from taxpayer-backed deals and own the team. If you thought government getting one more cent of your money was frustrating, this odd tax situation manages to add insult to injury.
This list should settle it once and for all, if you make it or do it, they will tax it.
For this year’s Milton Friedman Legacy Day activity, NTU Foundation asked taxpayers across the country what federal tax system they want. At our in-person event in downtown Washington, DC and online at our special voting page, we had over 650 total votes on if the current system should be kept or replaced with a FairTax, Flat Tax, National Transaction Tax, or a Value-Added Tax.
If you are unfamiliar with these tax systems, we had some fancy posters made to show the basic points and contentions associated with each (you can click on each to see the full resolution):
Here are the results broken down by those who attended our physical event and those voting via our survey online:
Put another way, here's an infographic put together by our fantastic Creative Content Manager, Tim Howland:
What do these results mean? Probably a few things:
We need more information and more taxpayers in the network of voting and voicing their preferences. Stay tuned, we here at NTU Foundation are working on another survey to get a more clear idea on what people want out of their tax system.16 Comments | Post a Comment | Sign up for NTU Action Alerts