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Taxes

Conversation Hearts Might Bring Mixed Feelings for Taxpayers this Valentine’s Day
Posted By: Douglas Kellogg - 02/14/14

hearts

It’s Valentine’s Day! Love is in the air, but taxpayers may not be feeling it after a year of reckless spending policies and more big government. Yet, as we pass around the “conversation hearts” this year, some of the fuzzy feelings they express might remind taxpayers of a few positives, though others could spark different emotions…

You Rock!

A number of states have cut taxes, or are looking to do so! Sure the federal government has broken taxpayers’ hearts this year, but states like North Carolina have cut taxes, and others like Wisconsin, Nebraska, and even New York are seeking tax reform.

Hug Me

Hold on to your free Internet and dynamic e-commerce tonight. Big retailers and uncompetitive, high-tax, states are trying to tear this love apart – but don’t give up, it’s worth fighting for!

Be Mine

The Balanced Budget Amendment (BBA) movement has continued to make progress through the states, as now Ohio’s recent passage of an Article V referendum makes 20 states who are on board with a convention to pass a BBA. Since the federal government is apparently not interested, taxpayers’ will have to walk a different road to reach this fiscal soul mate.

Miss You

The list of things taxpayers might be longing for could potentially go on for eternity. Some of the most notable lost loves could be lower federal tax rates (on income, and payroll taxes), a more stable dollar and lower Consumer Price Index, non-government controlled healthcare and not being forced by the government to buy something, and jobs.

UR Cool or UR Hot

Depending on where you live, energy might be warming you up or keeping you cool, either way the growth of domestic energy production has been a good thing for taxpayers. So far, punitive taxes sought by the President and others have not stopped this party – however, this electric partner could be powered down if Congress flips the wrong switch.

Taxpayers may have loved and lost, but hope is still alive for the hopeless romantics who won’t give up on a brighter fiscal future!

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Speaking of Taxpayers, Jan. 17: Trillion-Dollar "Omnibus"; Taxpayer Advocate Hammers IRS
Posted By: Douglas Kellogg - 01/20/14

Subscribe to NTU's podcast via iTunes!

Taxpayer's Protection Alliance's Michi Iljazi joins the podcast to breakdown what is in the massive, trillion-dollar, omnibus bill, and the Taxpayer Advocate's new report on all the areas the IRS needs work (it's a long report). Plus, the Outrage of the Week!

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Video: House Ways and Means Committee’s Tax Reform Goals
Posted By: Dan Barrett - 01/15/14

Today, the committee in charge of the Tax Code released a video on how the system doesn’t work and how they plan to fix it. The Republican-led body presents three solutions:

  1. Make the Tax Code simpler and fairer: “By getting rid of all the junk in the income Tax Code, we could shrink it by 25 percent”
  2. Make the Tax Code more efficient: “By getting rid of special interest handouts and lower tax rates across the board”
  3. Make the Tax Code more accountable to taxpayers: “Whenever a tax loophole gets closed, let’s make sure that money goes back to the people who are paying the taxes in the first place and not to pay for more Washington spending”

Though these are lofty goals for Congress, it's clear from recent legislation like the 2012 American Taxpayer Relief Act that making a meaningful impact on our Tax Code will require extensive reform. Almost everyone agrees that the system is “too complex, too confusing, and too costly” and that is precisely why having a plan makes sense. Still, identifying the problem is just the first step towards fixing it. U.S. businesses -- big and small -- deserve, a fair, effective, and efficient Tax Code and Washington is in the prime position to fix it.

Here’s hoping that Congress can come together to relieve all taxpayers of the dread and stress of the current Tax Code (a system that has been changed “4,400 times over ten years” by both parties).

For more information on how complex our tax system is, check out NTU’s 2013 Tax Complexity study, which will be updated later this year. NTU Foundation also surveyed folks which tax system the U.S. should change to during our annual Milton Friedman Legacy Day event.

How would you change the Tax Code? Streamline the current system? Completely replace it? Leave a comment down below!

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Per-Mile Fees Would Drive Up Transportation Costs
Posted By: Michael Tasselmyer - 12/26/13

In a recent edition of The Taxpayer's Tab, we here at National Taxpayers Union Foundation highlighted a bill offered by Congressman Tom Graves (R-GA) and Senator Mike Lee (R-UT) that would phase out federal control of certain roads and other infrastructure in order to transfer that authority to the states. The Transportation Empowerment Act was introduced in the wake of warnings from the Congressional Budget Office that the Highway Trust Fund, which finances the construction and maintenance of most of those transportation projects, is in poor fiscal condition.

Among the recommendations for keeping the Fund solvent? A nearly 83 percent increase in the federal gas tax, up to 33.3 cents from its current level of 18 cents.

That particular suggestion came from the office of Congressman Earl Blumenauer (D-OR), who also recently introduced H.R. 3638, the Road Usage Fee Pilot Program Act of 2013. Rep. Blumenauer’s bill would authorize $35 million to study how a mileage-based fee program might be implemented in place of the gas tax.

The Congressman has called for similar studies before. In January, NTUF highlighted legislation that Blumenauer introduced in the 112th Congress that would have authorized nearly $155 million for review of the same scenario.

A per-mile fee would likely be instituted in one of three ways:

  • A GPS-based system would use satellite technology to track the total mileage a registered vehicle travels during a pre-determined period of time. That information would then be sent to a central database, where bills would then be processed and sent to drivers.
  • A "pay-at-the-pump" system would also rely on wireless tracking systems to log drivers' travels, but the fee would instead be charged at gas stations across the country whenever drivers decide to fill up.
  • A prepaid system would require drivers to buy "mileage licenses," authorizing their use of public roads for a certain period of time or total mileage before requiring renewal.

Aside from the obvious privacy concerns and challenges of implementation and administration (especially from a financial and logistical standpoint), these proposals all have one thing in common: they would increase the cost of driving significantly.

The Government Accountability Office recently modeled the effect of a (seemingly modest) 0.9 to 2.2 cent per mile tax on the typical American driver. They found that the average driver would pay between $108 and $248 per year under that system, compared to the $96 they pay now – an increase of at least 12.5 percent.

Current funding for federal transportation infrastructure, under the MAP-21 Act, expires at the end of 2014.

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(AUDIO) Taxpayers Get Raw Deal - Speaking of Taxpayers
Posted By: Dan Barrett - 12/16/13

NTU Foundation's Demian Brady and NTU's Brandon Arnold both offer insight on why the numbers don't add up and what to do as the bill heads to the Senate. Plus the Outrage of the Week! 

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Report on America’s “Broken” Tax System Shows Cracks of Its Own
Posted By: Pete Sepp - 12/12/13

Many voices, on various points of the political spectrum, concur that America’s corporate tax system is afflicted with a high rate, mind-numbing complexity, and heavy compliance burdens. Yet, the Center for Effective Government recently came out with a report attempting to demonstrate that there is no correlation between lower corporate tax rates and job creation. And while practically everyone agrees with the first line of the report’s Executive Summary – “The American corporate tax system is badly broken” – that’s not a good reason to buy all of its other conclusions.

The report states that, “Our examination of the evidence found no relationship between cutting tax rates on corporate profits and job growth.” And therein lies one major problem – the “evidence” itself.  As with a recent report from the Government Accountability Office, which we critiqued here, using a sample over a small window of time to calculate effective tax rates does not give a complete picture.

The time period used in the report – 2008 to 2012 – was one of abysmal job creation across the entire economy due to the severity of the Great Recession. Furthermore, corporations have demonstrated time and again how profits and losses fluctuate over several years based on expenditures such as research and development. So tying low job growth during a recession to tax rates over a short time period can’t possibly tell the whole story.

Connecting higher corporate taxes directly to increased job creation, without taking into account other factors – such as a given company’s industrial sector – is also tricky. It’s important to adjust for other reasons why tax rates may have been lower or higher (higher capital expenditures for which deductions apply) or why job creation may have increased or decreased (strength of an industry).

Although the report does acknowledge some need to overhaul the tax system, the agenda is clear in its data presentations, which purport to show why businesses must contribute more of the “revenue needed to invest in modernizing the transportation, information, communications, and energy infrastructure.”  In current budget lingo, “invest” is often code for “spend a whole lot more.” Furthermore, as my colleagues at the Tax Foundation ably pointed out, the study utilized “apples to oranges” comparisons of corporate profits and corporate taxes to paint a distorted picture.

Also tellingly, the study’s introduction notes that had businesses paid the 35 percent tax rate on all of their profits, “total corporate tax receipts would have been $630 billion (rather than the $242 billion they actually paid), and the deficit would have been reduced by nearly a third.” Of course, the same could be said for individuals: after all, if only America’s families would just cough up more at the regular statutory tax rates, instead of taking those pesky write-offs for things like mortgage interest, charitable contributions, or state and local tax payments, why the Treasury could be flush with surpluses.

The bottom line is that country after country continues to lower their corporate tax rates and simplify their taxpaying procedures, and they are doing this for a reason – to attract business and create job growth. Meanwhile, the U.S. tax system, with the worst rate in the industrialized world, continues to be a laggard in pursuing tax reform. Here’s hoping policymakers stop pointing fingers and start pointing the tax law in a better direction. 

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'Tis The Season... For More Taxes
Posted By: Michael Tasselmyer - 12/06/13

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.

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Tax Hikes Will Dim Black Friday for Some States’ Shoppers
Posted By: Douglas Kellogg - 11/26/13

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:

http://taxfoundation.org/blog/map-state-gasoline-tax-rates

http://taxfoundation.org/article/state-and-local-sales-tax-rates-midyear-2013

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The Myth of the 12.6 Percent Effective Corporate Tax Rate
Posted By: Curtis Kalin - 11/04/13

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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A Tax That (Literally) Makes You Sick?
Posted By: Michael Tasselmyer - 10/30/13

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.

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