Taxpayer Tab August


What Tax System Do Taxpayers Want?

2014 Friedman Legacy Tax Poll ResultsTaxpayers from across the country voiced their preference for either a new tax system or reforming the current one in this year's Milton Friedman tax reform poll. They had five options to choose from (a FairTax, Flat Tax, Transaction Tax, Value-Added Tax, or to keep the current system) and the opinions did not disappoint the NTUF staff!

Which tax system do Americans want?The FairTax was the top choice in our poll for the second consecutive year ... but that's not the end of the story. Check out what each of the choices would mean for taxpayers and how many people voted for each reform onGovernment Bytes!


Most Expensive Bill of the Week

The Bill: S. 2342, the Stop Subsidizing Childhood Obesity Act

Savings Per Year: $500 million (one-year cost)

Senator Richard Blumenthal (D-CT)According to research from the Centers for Disease Control and Prevention (CDC), the incidence of childhood and adolescent obesity has increased rapidly in the past 30 years. In 1980, about seven percent of children and five percent of adolescents were considered obese. By 2012, those percentages had jumped to 18 and 21 percent, respectively. Obesity has been associated with higher rates of health problems like heart disease, diabetes, and cancer, and in recent years the issue has been a public policy focus at the local (e.g., New York City's bans on soda and trans fats) and federal levels (First Lady Michelle Obama’s “Let’s Move” initiative) as health care costs continue to rise.

A 2012 report from the Federal Trade Commission (FTC) found that the food industry spent $2.1 billion on youth marketing efforts in 2006; $1.29 billion, or 76 percent of that amount, funded advertising for fast food, carbonated beverages, and breakfast cereals. Under current tax laws, fast food restaurants – along with many other types of businesses – are allowed to deduct certain marketing and promotional expenses from their taxes. Some lawmakers are concerned that those deductions essentially subsidize foods that contribute to obesity in children and teens.

In 2012, former Congressman Dennis Kucinich (D-OH) introduced legislation that would prevent businesses from claiming deductions on promotional efforts for foods of “poor nutritional quality,” as determined by the FTC and the Department of Health and Human Services (HHS). The goal was to reduce consumption of fast food by children and adolescents, who Rep. Kucinich claimed were especially influenced by “sophisticated, targeting” marketing efforts from the food industry.

Rep. Kucinich’s legislation has been reintroduced in the 113th Congress bySenator Richard Blumenthal (D-CT) as the Stop Subsidizing Childhood Obesity Act. S. 2342 would prohibit deductions for marketing of foods that don’t meet nutritional standards set by FTC and HHS. The legislation would authorize additional expenditures for the U.S. Department of Agriculture’s (USDA) Fresh Fruit and Vegetable program, equal to the amount of increased revenue in the absence of fast food marketing deductions. The Fresh Fruit and Vegetable program offers grants to schools to offer more fresh, local produce for students. The program, which was initially established as a $10 million pilot program in 2002, offers participating elementary schools between $50-75 per student and received about$205 million in funding in FY 2014. Congresswoman Rosa DeLauro (D-CT)introduced similar legislation in the House as H.R. 2831, but her bill did not include the additional USDA funding provision.

According to Senator Blumenthal’s office, eliminating the tax deductions in question could raise about $500 million per year, which would then be spent in addition to any funds already appropriated for the USDA’s Fresh Fruit and Vegetable program. capitol_dome_tinytaxtabhaticonalpha.png

The Bottom Line: The Stop Subsidizing Childhood Obesity Act would eliminate certain tax deductions for marketing of fast food products, and authorize additional spending of about $500 million for existing school nutrition programs.


Least Expensive Bill of the Week

The Bill: H.R. 4677/S. 2339, the State Exchange Accountability Act

Savings Per Year: $75 million ($373 million over five years)

Congressman Tom Reed (R-NY)The primary means by which lawmakers intended to expand access to health insurance coverage under the Affordable Care Act (ACA) was through health insurance “exchanges,” a very complex technological infrastructure to link consumers with health insurance providers. Insurance can be obtained outside of the exchanges, but individuals who purchase coverage this way will not be eligible for premium subsidies from the federal government. Though the law called for each state to run its own online marketplaces, only 17 states did so. States that did not opt in deferred to the federal government to establish and maintain their exchanges. (Currently, federal courts are considering whether premium subsidies can be obtained through the federal exchanges because the law itself specifies that assistance is available through exchanges set up by a state.)

The federal exchange has seen widespread and systemic failures at various phases of implementation, as estimates from the Government Accountability Office pin the total cost thus far at $840 million. Initial estimates had the costs of the exchanges at $56 million in 2011. However, the state-based exchanges have not been trouble-free either. Despite periodic reviews and receiving hundreds of millions of dollars in taxpayer-funded subsidies to assist them, four states have already decided to scrap their websites and start over.

Massachusetts, Maryland, Oregon, and Nevada have encountered so many technical and security issues in implementing their exchanges that they have either decided to opt into the federal system or create new websites altogether. Oregon and Nevada will be joining the site; Maryland has finalized a $50 million contract for new software; and Massachusetts is expected to confirm a deal for privately produced software in the coming weeks.

Senator John Barrasso (R-WY)According to a letter from the House Energy and Commerce Committee, taxpayers funded $746 million in grants for those four states’ failed exchanges, and there are at least three more – Hawaii, Vermont, and Minnesota – that are on the verge of abandonment, despite having received $568 million in federal assistance.

Congressman Tom Reed (R-NY) and Senator John Barrasso (R-WY) introduced measures in a legislative attempt to recoup some of those funds. Under the State Exchange Accountability Act, states that received federal grant money to establish exchanges that were in operation at any point in 2014, only to abandon those websites later, would be required to reimburse the government for those amounts within ten years. NTUF assumes that if the legislation were signed into law, the $746 million owed by the four states with failed exchanges would repay those amounts in equal installments over the next decade, about $75 million per year. capitol_dome_tinycapitol_dome_tinytaxtabhaticonalpha.png

The Bottom Line: The State Exchange Accountability Act would require states to pay back the grant money they received to establish ACA exchanges if they later opt out of those systems. It would result in about $373 million being returned to the Treasury over the next five years.


The Wildcard

The Bill: H.R. 5095, a bill to mandate all Members, Delegates, and the Resident Commissioner of the House of Representatives to complete annual ethics training conducted by the Committee on Ethics

Cost Per Year: “No Cost” – No New Funding

Congressmen Dave Cicilline (D-RI)Under current law, all new officers and employees within the House of Representatives (including paid interns and those who haven’t worked there in over 90 days) must complete an ethics training seminar conducted by the House Committee on Ethics. Additionally, returning employees must retake the training each year, and senior staff must undergo an additional hour of training once every Congress. As of December 31, 2013, there were 9,313 employees in the House.

Similar training is also offered in the Senate, and is required of both Members and staffers alike. Topics covered inslideshows available online include how to determine if gifts are acceptable, travel reimbursement procedures, and how to recognize scenarios that could create conflicts of interest.

Congressmen Scott Rigell (R-VA)However, although all employees in the Senate and House staffers are required to complete ethics training, House Members are not. Congressmen Dave Cicilline (D-RI) andScott Rigell (R-VA) have introduced legislation to address that, and require all Representatives to attend the same training sessions that staffers complete on a yearly basis. Congressman Rigell suggested that H.R. 5095 was a “commonsense” reform, stating in a press release that “[a]s a starting point, Members of Congress must be held accountable to the same ethical training standards required of their staff.” Congressman Cicilline added that “Members of Congress should not be exempt from ethics training and enacting this requirement will help restore the public’s confidence in Congress.”

NTUF does not anticipate the bill’s provisions to require significant additional funding, since it would presumably utilize existing training materials and resources for other employees in the House. capitol_dome_tinytaxtabhaticonalpha.png

The Bottom Line: H.R. 5095 would require Representatives in the House to undergo ethics training sessions that are currently required of House staffers as well as Senate Members and staff.