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With Many Businesses Closing Their Doors, It's Time to Open a "Repatriation Window"
Remember the good ol' days? Back when the United States only had the second highest corporate tax rate in the industrialized world? Those were good times. But with Japan having implemented a 5 percent cut in their corporate rate (and potentially seeking further reductions) America is left with the ignominy of taxing it's businesses more than any other developed country.
Permanent and fundamental reform is needed to reduce America's corporate income tax burden. Unfortunately, beyond punitively hiking taxes on a few disfavored industries (oil), President Obama has shown little willingness to make any wholesale changes to our uncompetitive tax regime.
But as NTU has argued, while we're waiting on the politics of larger reform, can't we at least build a consensus around a common-sense corporate tax holiday? The idea would be to create a period of time in which U.S.-based businesses could repatriate, that is to say, bring back, foreign earnings that they were stashing overseas so as not to pay our sky-high tax rates.
Sure, it's not ideal, but it could allow companies to reduce debt, increase investment, and jumpstart hiring. And in case you've been living under a rock (or vacationing in Martha's Vineyard) those are three things the American economy could sorely use right about now.
So what's the hold up? Well, some have begun to argue that the cost of a repatriation window is just to high, especially at a time of deep deficits. They say that the expectation of future tax holidays would lead businesses to simply park their cash overseas rather than bring it back at normal tax rates.
A new study out by NDN, a progressive think tank, should allay these fears. "Rather than the $78.7 billion revenue loss projected by the JCT, enacting a "repatriation" provision similar to H.R. 1834 this year would likely bring in a net $8.7 billion over 10 years to the U.S. Treasury," says the group via press release.
The study also found that the last repatriation holiday led to significantly more money being brought to the U.S. than expected under the JCT model and did not lead to a sharp decline in money repatriated at the standard 35 percent rate.
Washington should absolutely push for more fundamental corporate reforms to ensure American businesses remain competitive in the global economy, but in the meantime a corporate tax holiday could provide a useful boost to GDP while also helping to pay down our staggering deficit.0 Comments | Post a Comment | Sign up for NTU Action Alerts
Cartoon Monday - Super Committee
Cartoons are back after a lengthy hiatus. A Congressional Super Committee-related cartoon via Tim Wise.
NTUF has released an analysis of the Super Committee. You can read the release here.1 Comments | Post a Comment | Sign up for NTU Action Alerts
Eliminate the Gas Tax?
TaxGirl asks the following question at Forbes: "Should the federal gas tax be reduced or eliminated in order to jump start the economy?"
Would it help? Would it make a difference at all? Would our infrastructure implode without the funding? Share your thoughts with us and with TaxGirl.1 Comments | Post a Comment | Sign up for NTU Action Alerts
Members of the Joint Select Committee on Deficit Reduction
12:45 Update: The Wall Street Journal is reporting "Pelosi names Reps. Becerra, Clyburn and Van Hollen to debt panel." Those Members and their scores have been added to the table.
Nine of the 12 members of the Joint Select Committe on Deficit Reduction have been announced. The panel is charged with producing a plan to reduce federal spending by $1.5 trillion over the next ten years. As we did with the Bowles-Simpson Commission, we take a look at the NTU Rates Congress scores of the panel's members to see how taxpayer-friendly the panel's recommendations might -- or might not -- be.
As with the Deficit Commission, Nancy Pelosi is the last one to make her selections.
High Tax Rate Threatens to Stunt US Growth
If you've spent much time reading the news the past few days you already know that good news has been few and far between. Our credit rating has been downgraded because of unsustainable debt, the stock market has plunged as the world economic outlook remains uncertain, and the U.S. economy isn't growing fast enough to put a dent in unemployment.
But in an increasingly globalized marketplace, our pain can be other countries gain. Sadly, rather than attempt to alleviate the problem, Washington has only made it worse by maintaining the second highest corporate tax rate in the developed world. As the LA Times reported today,
Many major U.S. companies are making big plans to expand overseas even
as some of them announce new layoffs at home, and there's a chilling
reason why: They're beginning to give up on the American consumer as a
source of future growth.
If America wants to remain a viable destination for capital and hold its spot as the world's top economy, our elected representatives must begin to take steps to make our corporate tax code more competitive. While fundamental reform of the tax code may take time, there is a step Washington could take immediately to encourage businesses to bring money and investment back to our shores - a corporate tax holiday. Representative Kevin Brady's (R-TX) "Freedom to Invest Act" would do just that, allowing companies to repatriate foreign earnings at a rate of 5.25 percent for one year. Read more about NTU's efforts to support this bill by clicking HERE.
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5 Things Washington Could Do to Jumpstart Job Creation
The debt ceiling debate has come to a merciful (if not ideal) come to an end. What is President Obama to do now? Why, pivot to jobs of course.
Sadly, it didn’t take a crack political mind, insider sources, or ESP to figure out what the White House was planning, you just have to look at history. A pivot to job creation has become Democrats go-to move. In fact, Ben Smith of Politico has identified at least six-other times that the Obama Administration has announced a similar shift.
Despite all the claims of a “laser-like focus” on jobs, the White House has never actually gotten around to it. Instead, apparently unable to walk and chew gum at the same time, he is consistently sidetracked by other things. But after more than two years and seven pivots Americans should begin to wonder whether it is truly an inability to multitask or whether it is simply that the Obama Administration has no idea how to promote job creation in the first place. It is almost as if he opened his Keynesian bag of tricks to discover it contained only one trick – stimulus.
So while the Administration pivots themselves in circles, here are several actions that Washington could pursue to create the environment needed for job growth:
These few simple ideas, many of which have already passed the House of Representatives, would provide an immediate spark to our economy. If only the Obama Administration would stop pivoting and start focusing on such policies perhaps America could escape its prolonged economic malaise.0 Comments | Post a Comment | Sign up for NTU Action Alerts
White House Admits Tax Relief Creates Jobs? Taxes Kill Jobs?
In a White House Press Conference, Press Secretary Jay Carney seems to spill the beans that tax hikes kill jobs. He pretty explicitely says tax cuts create jobs, which is a belief that goes hand-in-hand with the understanding that tax hikes would kill jobs...This makes a variety of the President's policies from tax hikes in Obamacare, to recently peddling for energy industry taxes, rather confusing. Rather than head on a taxpayer funded bus tour of battleground states to talk about jobs, perhaps the President is well aware he should look to relieve the tax burden instead?
MR. CARNEY: "Well, the White House doesn’t create jobs. The government together -- White House, Congress -- creates policies that allow for greater job creation. And that can be through tax cuts, for example, for working Americans; everyone who works pays a payroll tax. And the tax cut that this President pushed for, for one year, for this calendar year, he’s pushing for to be extended next year."0 Comments | Post a Comment | Sign up for NTU Action Alerts
Yes, Virginia, the New Supercommittee Can Include Tax Hikes
So, there's a debt ceiling "deal" in Washington after months of haggling. The outline has some things to commend it (substantial and enforceable spending cuts, no immediate tax increases), and some things that have prevented NTU from supporting it (doesn't require passage of a Balanced Budget Amendment). But one of the most confusing aspects has been the so-called "Supercommittee" the debt ceiling bill establishes. This evenly-divided 12-member Joint Select Committee would be required to pursue $1.5 trillion in deficit reduction to report before Thanksgiving and, should a majority of 7 or more committee Members support its recommendations, Congress would be required to give the resulting bill expedited floor consideration (AKA no amendments, no filibuster) in both chambers by Christmas.
But note that its goal isn't spending reduction, it's deficit reduction. That's a code that should set off alarm bells for conservatives as setting the stage for tax increases. In fact, if you look at the legislative language of the new version you'll find that there is no prohibition on inclusion of tax hikes. So why is it that Republican proponents of the bill have claimed this shouldn't be cause for concern? Speaker John Boehner's own presentation to his conference said that the structure would "effectively mak[e] it impossible for the Joint Committee to increase taxes." Who's right here; does the bill allow for tax increases or not? The answer is that it does indeed allow for tax increases, and here's why.
The Speaker is referring to the fact that the committee will be required to operate on the Congressional Budget Office's "current law" baseline, which assumes that ALL of the Bush tax cuts expire and the Alternative Minimum Tax dramatically expands. That means that once those changes kick in at the end of 2012 we're looking at $3.5 trillion worth of built-in tax increases over a decade. As such, any monkeying with marginal income tax rates that would leave them below the full Clinton levels (i.e. an attempt to extend all Bush tax cuts except those for the "wealthy") would actually be scored as a "tax cut" from the assumed $3.5 trillion hike in the baseline, thus failing to fulfill the committee's required goal of reducing the deficit. In order to produce something that would score as a "tax increase" by altering marginal rates, you'd have to go above and beyond Clinton levels and increase taxes even more than the $3.5 trillion that's baked into the cake, something that I can't imagine any Republican agreeing to.
So the Speaker is right that the structure of the committee effectively protects against marginal rate increases or any wholesale tax reform that would yield dramatically more revenue than the additional $3.5 trillion that's already built in, but here's what is being ignored. The Supercommittee could very easily take a number of actions that would both hike taxes compared to where they are today and score as a deficit-reducing tax increase on CBO's current law baseline. For example, they could implement a cap of the mortgage interest deduction with the intention of reducing that benefit for wealthier Americans. That policy would likely amount to a substantial tax increase and would count as a deficit-reducer on CBO's current law baseline. The same is true of any number of changes to credits, deductions, or exemptions. The Supercommittee could also resort to tax surcharges, much the way the 2010 health care law did. They could easily add a brand new tax surcharge of, say, 5% on incomes over $1 million. This is essentially creating a new layer of taxation on top of the existing marginal rate structure. Such a surcharge would amount to a substantial tax increase and would count as a deficit-reducer on CBO's current law baseline.
As you can see, it's not accurate to say that the committee's structure makes tax increases impossible. It makes changing marginal tax rates close to impossible, but it doesn't really do anything to constrain the ability of the committee to modify credits, deductions, and exemptions in a way that could bring hundreds of billions in new tax revenue to pay for Washington's overspending. But proponents of this bill say that there are two more backstops: the appointees to the committee, and the House of Representatives. They say that if we appoint conservatives to the committee that they'll refuse to agree to a report including tax hikes. That may well be true, but I don't know how confident I am given that apparently dozens of Senate Republicans are supporting the so-called "Gang of Six" proposal which seeks a $2.3 trillion tax hike achieved in large part through modifications to credits, deductions, and exemptions. All the committee needs to secure expedited consideration of its proposals is for one Republican to join all six Democrats.
As for the House of Representatives and its strong Republican anti-tax majority, that too is of little comfort. If Democrats united in support of a package including tax increases, they'd easily secure Senate passage and would only need 25 Republicans to join the 193 Democrats to secure House passage. Normally I'd be confident that Republicans could muster a sufficient number of votes against a tax increase, but the Gang of Six experience and the profusion of rhetoric conflating reductions in tax burdens through credits/deductions/exemptions with actual government spending gives me serious pause.
This has been a long post, but the bottom line is this: the Supercommittee can include tax hikes and you can bet your bottom dollar that President Obama and Congressional Democrats, many of whom feel burned by this current debt ceiling deal, will push extremely hard to make sure that it does exactly that.0 Comments | Post a Comment | Sign up for NTU Action Alerts
The threat of a devastating online affiliate sales tax, and other tax hikes, is still lurking in Maryland, but has taken some unexpected positive turns
At Tuesday’s Budget and Taxation Committee briefing, Chairman Kasemeyer stressed none of the proposals heard before the Budget and Taxation Committee are under active consideration and he is not currently expecting to take up the issue of finding new revenue during the October special session.
Looking specifically at the issue of online affiliate taxes: Maryland has twice, in 2009 and 2010, looked at implementing an Amazon Tax. SB 824 and SB 1071 would have amended Maryland’s tax code to establish that a person, or seller, without a physical presence in the state is presumed to engage in taxable business in the state if that person: 1) enters into an agreement with an in-state resident by which the resident agrees, for a commission or some other consideration, to refer customers either directly or indirectly, such as through an Internet link, to that out-of-state person, and 2) the cumulative gross receipts of sales from referrals are greater than $10,000 during the preceding year.
If that language looks familiar, it is because it is almost word-for-word the same failed legislation passed in 8 other states. The author of the two previous bills, Senator Madaleno, will again push for such language. However, the Committee expressed some skepticism on the Amazon tax and floated a couple other ideas to target the $160 million in unremitted sales taxes. The Committee suggested offering a temporary sales tax exemption to an online-only retailer who locates a physical presence in the state, such as a warehouse, or forcing online retailers to place a disclaimer at the end of all sales reminding customers of their obligations. NTU will be keeping an eye out for a concrete proposal from the General Assembly.
The Committee spent significant time looking at possible expansions of the sales tax to service industries. Currently, Maryland applies its sales tax to four sectors of the service economy (pay-per-view TV, certain cleaning services, cell phone service, and pre-paid calling cards). Legislative Analysts for the General Assembly stated that expanding the 6% sales tax to other sectors has the potential to raise upwards of one billion dollars. Taxis, cable TV, and haircuts were mentioned as potential targets.
The briefing was intended to be ‘informational’ only, the claim being that Maryland is not looking to raise taxes, but in case we need to, here are some options. Of course, once that option is on the table for government, taxpayers need to watch out.
It should be some consolation that the Senate is devoting some effort to examping the possible consequences of tax hikes. That may help avoid another debacle like the repealed computer services tax in 2007. Another way to avoid such situations would be to cut spending, not raise taxes, when looking at a budget deficit.0 Comments | Post a Comment | Sign up for NTU Action Alerts
Where You Travel Matters
One online reservation site says that where you book matters. It turns out, that where you're headed matters too -- in terms of your tax bill that is. Tanya Mohn, blogging at Forbes.com, reports on a study done by the Global Business Travel Association Foundation that found "taxes targeting travelers impose an average cost of 56 percent more than general sales taxes." The report looks at the overall tax burden that travelers face (this combines both general sales tax and travel-related taxes) as well as just travel-related taxes.
So, if you still haven't booked your summer vacation yet, take a look at the lists and see whether you'll need to fork over a little more in taxes for that enjoyable summer getaway.0 Comments | Post a Comment | Sign up for NTU Action Alerts