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GovernmentBytes
Apple Case Highlights Need for Corporate Tax Reform Yesterday, on May 21st, Apple CEO Tim Cook and two other executives were summoned before the Senate Permanent Subcommittee on Investigations, where they were thoroughly chastised by many from the majority party for the company’s use of offshore strategies to reduce its U.S. tax burden. The interrogators did not ever contend that Apple had been operating illegally, but rather the committee focused on the fact that the company, in the words of Sen. Carl Levin (D-MI), “has a highly developed tax avoidance system.” Levin went on to blame corporations like Apple, who do what they can to lower their tax burdens, for the out-of-control, $642 billion federal deficit. "There is a direct relationship between this rapidly accelerating shift of corporate profits offshore, on the one hand; and on the other, a worrisome federal deficit fed in part by a decline in the contributions corporate taxes make to federal revenue. Corporate income tax revenue has accounted for a smaller and smaller share of federal receipts, and today is down to about 9 percent of federal revenue.” While the U.S. tax code is indeed absurdly complex, how can politicians get on a high horse and berate companies like Apple who provide plenty of tax revenue and economic activity despite a record-setting recession and the U.S. now boasting the world’s highest corporate tax rate? Is it really fair to blame Apple, when the company itself is likely the largest corporate tax contributor, shelling out a far-from-modest $6 billion in federal income taxes last year? If the tax code were less burdensome and laborious to navigate, companies like Apple wouldn’t need to devote such resources to working through our overcomplicated tax system, and could instead focus on what they do best: creating valuable electronics while employing thousands of people. In his defense of the company’s practices, Apple CEO Tim Cook seemed to be echoing this sentiment, even laying out his own proposal for a simpler and fairer tax system, as USA Today reported: Cook also sketched a proposal for a revenue-neutral simplification of federal tax laws that would lower corporate tax rates to roughly 25% and create a "single-digit" percentage tax on foreign earnings that multinational U.S. firms bring home to use for job creation and economic investment. Corporations, contrary to the anti-business rhetoric constantly espoused by some politicians looking to blame federal deficits on business instead of taking responsibility for their addictions to spending other people’s money, are not in fact the enemy of taxpayers or consumers. This situation involving Apple illustrates this point, and makes the argument for a simplified and reduced corporate income tax all the more urgent. NTU has long advocated for lowering and simplifying the corporate tax rate. In a blog post just last month, NTU quoted the RATE coalition, a group of concerned businesses working toward reducing the corporate income tax: "Today, at 35%, the top federal statutory corporate tax rate is 10 percentage points above the OECD average and nearly 15 points higher when state and local taxes are included,” says the letter, referring to the 34-nation Organization for Economic Cooperation and Development, and signed by 21 CEOs. "The costs to our economy are significant and already being realized. According to a new Ernst & Young study, GDP in 2013 is expected to be between 1.2 and 2.0% lower as a result of our OECD-leading corporate tax rate. Simply put, the U.S. can no longer afford to stand still." Not only do high corporate tax rates take a serious toll on our economy, the perverse incentives created by our burdensome and complex system actually produce less revenue, despite record-high rates. NTU Vice President of Government Affairs, Brandon Arnold explains in the Washington Times: Eliminating all corporate-tax deductions and credits would produce enough revenue to lower the rate to 28 percent without adding to the deficit. Counter-intuitively for the tax-and-spend group: Those seeking to increase revenue should, in fact, advocate for even lower rates. According to research by the Tax Foundation, reducing the rate further to 25 percent would increase gross domestic product by 2.2 percent and raise federal tax revenue by 0.8 percent. Combining such tax reform with serious spending cuts is the only way to tackle the deficit Sen. Levin was so concerned about, while encouraging a more prosperous economy.
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The Late Edition: May 22, 2013 Today’s Taxpayer News! The latest Farm Bill to hit the Senate for a vote is still going to cost a whopping $955 billion or more, as Pete Sepp pointed out earlier this week, making it a very bad deal for taxpayers. You can take action here, and urge your Senator to vote it down. NTU’s Manzanita McMahon offers context on Tuesday’s Senate hearing where Apple’s tax practices were examined. 0 Comments | Post a Comment | Sign up for NTU Action Alerts
Internet Sales Tax Would Be Bad for Small Businesses Our former Director of Government Affairs, Paul Gessing, penned a great op-ed about the so-called “Marketplace Fairness Act,” which is better known as the internet sales tax bill. Opponents of this massive expansion of government power have claimed it is necessary to help the small business community. Paul, however, notes that some small businesses would actually be devastated by the legislation: One Albuquerque-based business owner has stated he would no longer sell his product online under an Internet taxation regime as set up under the Marketplace Fairness Act. The issue is not an unwillingness to have his consumers “pay their fair share,” but the compliance costs that involve submitting documentation, often on a monthly basis even if his company has no sales in that particular jurisdiction. He is by no means the only small business owner to face negative repercussions from Congressional overreach on Internet sales. It is one big reason why Ebay, Etsy, and their small, but numerous sellers oppose the Act while the online behemoth Amazon has become one of its primary advocates. The “Marketplace Fairness Act” isn’t about helping small businesses. Paul pegs the bill for what it really is: an attempt by state tax collectors to get their hands on as much of your money as they possibly can. You can read more about the issue here, here, and here. 3 Comments | Post a Comment | Sign up for NTU Action Alerts
Watch LIVE - NTU's Brandon Arnold on AEI's Free beer panel: Liberating libations from ‘Bootleggers and Baptists’ If you are having any trouble with the video, or are looking to watch after the event, click HERE. Via the American Enterprise Institute: "For centuries, the manufacture and sale of beer, wine, and spirits has been a highly profitable and highly regulated enterprise. And where profit and regulation meet, cronyism and rent-seeking frequently follow. "From moonshiners buying off politicians during the Prohibition era to liquor stores trying to ban supermarkets from selling beer today, regulation has been used to keep start-up brewers, winemakers, and distillers from manufacturing alcohol; to preserve inefficient distribution systems; and to restrict choices available to consumers. Frequently, this regulation has been used for “noble social goals” — hence the famous public choice example of "Bootleggers and Baptists." "Can markets and consumers win? Join us for a discussion of the history and future of federal and state alcohol regulation and competition, followed by a reception with beer, wine, and spirits." 5:00 PM
The Late Edition: May 21, 2013 Today’s Taxpayer News! The House plans to vote tomorrow on moving forward with the Keystone XL pipeline, an economically beneficial project which NTU and a wide coalition of interests support. In the midst of unraveling the IRS’s targeting of conservative groups, it has also come to light that the agency improperly gained access to millions of personal health records, calling into question its upcoming role in implementing “Obamacare.” Read the full story from the Heartland Institute. A Washington Post-ABC News poll released today finds that 56 percent of those polled believe the IRS intentionally singled out conservative groups for unfair treatment, says The Hill. 1 Comments | Post a Comment | Sign up for NTU Action Alerts
Scandal-mania Runs Wild! - Speaking of Taxpayers, May 17, 2013 Subscribe to NTU's podcast "Speaking of Taxpayers" via iTunes!
Back from an unwelcome hiatus, and the Washington world has gone haywire! In an extended podcast, Pete & Doug discuss the IRS scandal, and NTUF's pros update on "Obamacare's" cost and the most and least expensive bills out there. And, the Outrage of the Week! 3 Comments | Post a Comment | Sign up for NTU Action Alerts
The Late Edition: May 20, 2013 Today’s Taxpayer News! Pete Sepp’s US News op-ed hammers the Farm Bill, which is once again making its way through the U.S. Senate but remains nearly as saddled with unnecessary spending as last year’s version. A senior White House Official has said Obama’s chief White House lawyer knew about the IRS’s targeting of conservative groups weeks ago. Read the full story from the New York Times. 3 Comments | Post a Comment | Sign up for NTU Action Alerts
Latest Taxpayers Tab: Top Ten Edition
This week in the Taxpayers Tab, NTUF sifted through the more than 2800 bills introduced in Congress so far and compiled a list of the 20 we've scored with the largest budgetary impact. The list gives taxpayers a look at the range of spending and savings measures proposed by their Senators and Representatives in Washington. Legislation on the list includes a $1.16 trillion universal health care proposal from Rep. John Conyers (D-MI). On the other end of the spectrum, Senator Michael Enzi (R-WY) introduced a spending cap bill that offers $99.5 billion in savings. We've also included an overview of how NTUF scored legislation that would repeal the Affordable Care Act, or "Obamacare." The Congressional Budget Office has stated in the past that a full repeal would increase the deficit, but those scores don't offer a complete picture of changes in discretionary spending that could occur if the law is undone. NTUF determined that a full repeal would actually reduce spending by $63.9 billion per year. The discussion is particularly relevant in light of yesterday's vote in the House of Representatives for a full repeal of President Obama's signature health care initiative. Click here to view the Tab online. To receive future updates via email, sign up for our mailing list here. 7 Comments | Post a Comment | Sign up for NTU Action Alerts
Reid Hijacks Senate to Rush Student Loan Bill There he goes again. Only a week after Senate Majority Leader Harry Reid to rammed the Marketplace “Fairness” Act through the Senate, he is once again circumventing normal order and thereby avoiding the legislative and public scrutiny of hearings, mark-ups, and other aspects of the committee process that risk derailing his agenda. Those who remember their high school civics class will recall that the Senate is supposed to be the chamber of deliberation where, as George Washington supposedly said, House legislation is “cooled” like hot tea in a saucer. The Harry Reid Senate is more tea kettle than saucer these days as legislation is being rushed through without the full consideration such policies deserve. Thanks to more shenanigans, it looks like taxpayers are about to get burned. The new bill at hand is S. 953, which would amend the Higher Education Act of 1956 to extend reduced interest rates for Stafford loans. While it’s old news that college graduates (myself included) are often saddled with large student loan debts, further extending the below-market interest rate of 3.4 percent won’t fix that problem, and could exacerbate sky-rocketing higher education costs. Federally subsidized student loans distort the loan market; inflating the price of college, and encouraging young people to accumulate debt while hiding the risk involved in such transactions. As I wrote earlier this year in response to the President’s State of the Union Address: Over the past ten-plus years, the average cost of a year of undergraduate tuition, room, and board at a public university rose 42 percent and the same costs at a private college or university rose 31 percent. Around the same time, federal aid tripled from $10 billion in FY 2000 to $30 billion in FY 2008! Taxpayer-funded subsidies that keep student loan rates artificially low have had the extremely negative impact of both inflating the cost of college degrees and opening the floodgates to a host of students with a higher risk of default or who are ill-prepared for the academic rigors of higher education. These students would have avoided taking on the enormous debt increasingly associated with a college degree where it not for the abundance of cheap credit at taxpayer expense. Rather than extending the harmful government meddling in the student loan market, Congress should be looking at ways to get out of the higher ed. business. Congress has been taking small, but important steps toward real reform and privatization in a similar area, federal flood insurance, and should consider a comparable path forward for student loans. A good place to start is letting the interest rate go up so that the true costs and risks involved are no longer hidden by price manipulation. The bill sponsors, Senators Reed (D-RI) and Harkin (D-IA) like to point out that this bill is “fully funded” in order to project an aura of fiscal discipline – but instead of cutting spending to pay for this outlay, they’ve resorted to convoluted tax gimmicks to increase revenues. It requires time to carefully analyze bills that contain complex policies and employ complicated tax measures. This is why normal order is so crucial. When the regular, deliberate process is ignored, taxpayers can be pretty sure it means bad news. 2 Comments | Post a Comment | Sign up for NTU Action Alerts
The Late Edition: May 16, 2013 Today’s Taxpayer News! NTU and the coalition of others fighting the internet sales tax recently gained an unlikely ally in anti-tax crusader and pro-wrestler Glenn Jacobs, aka “Kane”. Read more form the Nashville Post. Two-thirds of the states have rejected the exchanges under “Obamacare”, effectively opting out of the law, but a new IRS rule is attempting to force them back into the game, says Forbes. The movement to repeal “Obamacare” is still strong in the House especially in the wake of the recent IRS outrage, since the agency is charged with much of the law’s operations. CNN has the full story. 3 Comments | Post a Comment | Sign up for NTU Action Alerts
The Budget: CBO's (Updated) Look Ahead On Tuesday, the Congressional Budget Office (CBO) released its updated baseline and budget projections for Fiscal Years 2013-2023. The report is an update of CBO's February projections, and provides a detailed forecast of where economists see tax and spending patterns heading over the next ten years. You can read the full report by clicking the link above. Below are a few highlights that I thought were worth mentioning in the limited room that a blog post affords me. The deficit in Fiscal Year 2013 will be lower than it has been in recent years. CBO lowered its estimate for FY13 deficits to $642 billion, nearly $200 billion lower than its February estimate of $845 billion. This is certainly good news, and indicates a slight shift towards more sustainable deficit levels -- at least in the short term. However, it represents the effects of certain "extraordinary" circumstances, namely:
By 2015, the deficit will fall to 2.1 percent of GDP. It'll rise again after that. In 2023, CBO expects the deficit to get back to around 3.5 percent of GDP, higher than historical averages. Debt held by the public should hover in the 71-76 percent of GDP range over that time:
Health care, Social Security, and interest payments will drive future spending. By CBO's estimates, Medicaid, Medicare, and Social Security spending will be lower over the next 10 years than forecast in February. However, those costs will still be driving government spending in the coming decade even as other discretionary spending decreases as a percentage of GDP:
Of course, with economic forecasts come a degree of uncertainty, so these projections may change as new laws are enacted. However, they offer a useful point of comparison against which various policy proposals can be measured when it comes to their effects on the budget. 1 Comments | Post a Comment | Sign up for NTU Action Alerts
Bipartisan Team Leads the Charge for Crop Insurance Reform Representatives Ron Kind (D-WI) and Tom Petri (R-WI) teamed up to introduce the Assisting Farmers through Insurance Reform Measures or AFFIRM Act today. Packed with much-needed reforms for federal crop insurance, the bill could save taxpayers billions of dollars. The current federal crop insurance program is rife with problems. Extremely generous subsidies that pay for 60 percent of a farmer’s premium and 100 percent of the administrative and operating costs of the PRIVATE insurance companies that provide coverage have turned the program into less of a safety net and more of a “farm income support program” as agricultural economist Bruce Babcock explains in this study. In 2011, the Environmental Working Group found that the top 10 percent of policyholders went home with 54 percent of the premium subsidy dollars. With taxpayers footing the bill for insurance costs – essentially guaranteeing profits regardless of market, weather, or other conditions – farmers have become less and less risk-averse, plowing under what would typically be unprofitable land that shouldn’t be tilled for environmental reasons. The federal crop insurance program lacks caps, means testing, or transparency - all commonsense modifications that would bring it in line with other federal agriculture programs and help to prevent costly fraud, like that uncovered just this March: Federal investigators have unraveled a massive scheme among dozens of insurance agents, claims adjusters, brokers and farmers in eastern North Carolina to steal at least $100 million from the government-backed program that insures crops. … Forty-one defendants have either pleaded guilty or reached plea agreements after profiting from false insurance claims for losses of tobacco, soybeans, wheat and corn. Often, the crops weren't damaged at all, with farmers using aliases to sell their written-off harvests for cash. With taxpayers, not farmers or insurance companies, on the hook for losses, it’s no surprise that that the program’s price tag for 2012 is a staggering $14 billion and growing – more than quadruple what taxpayers paid just ten years ago. Considered within the context of out-of-control spending and a looming debt crisis, it’s obvious real change is needed to protect taxpayers and help to end the perverse incentives caused by this upside-down insurance scheme. In a press release this morning, the bill’s sponsors explained: The AFFIRM Act limits the total value of crop insurance subsidies to $40,000 per person each year, eliminates crop insurance premium subsidies for individuals with an adjusted gross income (AGI) of more than $250,000, and requires more of the administrative and operating (A&O) costs to be shared by the private companies that offer coverage. It also limits renegotiation of the Standard Reinsurance Agreement (SRA) and lowers the “target rate of return” that USDA builds into premiums in order to guarantee long-term profitability for crop insurance companies. … These reforms would be put in place while bringing more transparency into the crop insurance program by requiring the reporting of all parties that receive federally subsidized crop insurance. Together, these important reforms will save taxpayers an estimated $11 billion over the next ten years. Reps. Kind and Petri should be applauded for leading the bipartisan charge for federal crop insurance reform. The measures imposed by the AFFIRM Act will help get taxpayers out of the crop insurance business and encourage increased privatization of agricultural risk – just as other industries deal with their own hazards. Given that farmers continue to enjoy record-high profits that are expected to continue rising over the next decade even as other sectors of the economy struggle to recover, the time has never been better to undertake these fundamental changes in agribusiness.
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What is the Oregon Medicaid study and what does it mean for taxpayers? 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. 2 Comments | Post a Comment | Sign up for NTU Action Alerts
The Late Edition: May 15, 2013 Today’s Taxpayer News! NTUF’s Michael Tasselmyer breaks down the CBO’s updated budget predictions through 2023. Take a first hand look at the inspector general report on the IRS "abuse of power" scandal. The IRS has wasted at least $110.8 billion dollars since 2000 in misappropriated Earned Income Tax Credits alone, says the Heartland Institute. Men between ages 25 and 36 could see their premiums jump above 50% as a result of “Obamacare” says CNN Money. Check out this chart showing how age and gender change the amount the law will likely have you pay.
The Late Edition: May 14, 2013 Today’s Taxpayer News! NTU’s Pete Sepp expresses concern over a proposal to have the IRS pre-fill tax returns, in light of the scandal surrounding allegations the agency singled out conservative 501(c)(4) tax exempt organizations for increased scrutiny. Read more from Politico. The list of organizations opposed to the “Dairy Market Stabilization Program” (DMSP), which would artificially raise milk prices and limit the dairy supply, is growing. The Wall Street Journal lists almost 150 organizations which have come out in opposition to the legislation, including NTU. According to Businessweek, Health and Human Services Secretary Kathleen Sebelius has been soliciting funds from private organizations to help enroll people in “Obamacare” exchanges. 2 Comments | Post a Comment | Sign up for NTU Action Alerts
Latest Taxpayer's Tab: A Second Stimulus?
In the latest edition of the Taxpayer's Tab, NTUF took an in-depth look at H.R. 1617, the Emergency Jobs to Restore the American Dream Act. Introduced by Congresswoman Jan Schakowsky (D-IL), the bill is designed to combat high levels of unemployment by offering federally subsidized job training and placement. It would continue funding for some of the programs that were introduced in President Obama's landmark 2009 stimulus bill -- the American Recovery and Reinvestment Act (ARRA) -- as well as implement new job programs. The legislation would offer jobs to eligible unemployed citizens through various "Corps" programs. Some of the bill's main programs would include:
Although the bill does not include any specific offsets, Rep. Schakowsky has stated her intention to fund the bill's proposals by raising tax rates on households earning more than $1 million annually. By NTUF's estimates, the bill would increase federal spending by $227.9 billion over 5 years, or $45.6 billion annually. For more details on this bill and its sponsor, check out the Tab online here. To receive future editions via email, be sure to sign up here. 2 Comments | Post a Comment | Sign up for NTU Action Alerts
The Late Edition: May 13, 2013 Today’s Taxpayer News! Is there fire under the cloud of smoke surrounding US AID’s contributions to Former British PM Tony Blair’s charities? Remember back in late-December when Washington was fretting about the Sequester cuts and their impact on the economy? According to Forbes, so far the effect of the cuts has been almost negligible. NTU recently supported the Seniors’ Tax Simplification Act of 2013, which would simplify the income tax filing process for those 65 and older. Read more from the Goldsboro Daily News. 1 Comments | Post a Comment | Sign up for NTU Action Alerts
The Late Edition: May 9, 2013 Today’s Taxpayer News! Pete Sepp weighs in on the future of the so-called “Marketplace Fairness Act” in this US News op-ed. Thanks to Governor Martin O'Malley and Lt. Governor Anthony Brown, Marylanders will endure 40 different tax and fee increases totaling an additional $20 billion from 2007 through 2018. Read the full story from the Potomac Patch. 1 Comments | Post a Comment | Sign up for NTU Action Alerts
The Late Edition: May 8, 2013 Today’s Taxpayer News! NTU’s Pete Sepp applauds Senator Rand Paul’s recent proposal to repeal the burdensome "Foreign Account Tax Compliance Act" (FATCA), which taxes Americans abroad. Read the full story from the Wall Street Journal. This piece from cincinnati.com explains that not only does the President’s 2014 budget proposal raise taxes by $1.1 trillion over a decade and increase spending by $800 billion; it never balances. One of the drug manufacturers which originally supported and lobbied for “Obamacare” is now calling the law ‘catastrophic’, says the Daily Caller. 2 Comments | Post a Comment | Sign up for NTU Action Alerts
National Commission on Federal Marijuana Policy Act While NTUF highlights at least four newly-scored bills in our weekly newsletter, The Taxpayer's Tab, we have a lot of legislation that don't necessarily fall into the "Least Expensive" or "Most Friended" categories. So, as a supplement, here's another bill introduced in the 113th Congress that taxpayers may find interesting. Just as the bills that appear in the Tab, this is a preliminary score and may be updated with new information. The Bill: H.R. 1635, the National Commission on Federal Marijuana Policy Act of 2013 Annualized Cost: $5 million ($10 million over two years)
To understand how current federal government policies interact with states, Congressman Steve Cohen (D-TN) has introduced H.R. 1635, which would create a 13-member commission. The National Commission on Federal Marijuana Policy would investigate the costs, health effects, business compliance expenses, and potential solutions in bridging the laws between different levels of government. Similar to other short-term panels, members would be permitted to hear testimony and deliver a formal report to Congress one year after the Commission was established. The text of the bill would authorize a total of $10 million to be spent while the Commission is in operation. NTUF assumes that the spending would take place over two years. To receive the latest Taxpayer's Tab, subscribe here. 1 Comments | Post a Comment | Sign up for NTU Action Alerts
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