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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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Illinois Court Strikes Down Internet Sales Tax Bill
Posted By: Nan Swift - 10/18/13

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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Live at the Fillmore: Broken Promises
Posted By: Michael Tasselmyer - 09/14/13

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.

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Taxpayer's Tab Subscribers React to DC Statehood
Posted By: Dan Barrett - 08/21/13

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 ntuf@ntu.org.

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