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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 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

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(AUDIO) Top 10 Mind-Boggling Taxes; Protecting Spending Caps - Speaking of Taxpayers, Aug. 16
Posted By: Douglas Kellogg - 08/19/13

Subscribe to NTU's podcast "Speaking of Taxpayers" via iTunes!

Pete & Doug discuss NTUF's "10 Most Mind-Boggling Taxes" list with author Austin Peters, NTU VP Brandon Arnold stops by to talk about his Washington Times op-ed advising the GOP to protect spending caps, and the Outrage of the Week!
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Top Ten Most Mind-Boggling Taxes
Posted By: Austin Peters - 08/13/13

Is there anything more confounding than someone who doesn’t think we are over taxed? While it may initially seem impossible for an individual to be so oblivious, the world does not have tax ‘price tags’ posted on everything to remind you.

Demonstrating the breakdown of who pays the burden of income taxes, for example, is clearly important – yet, sometimes it’s better to focus on the smaller, widespread, tax burdens we all face. After all, nobody is able to avoid the burden of government.

To that aim, we put together this collection of the “Top 10 Most Mind-Boggling Taxes,” perhaps your city or state has made the list!

10. Fountain Soda (Chicago)

In Chicago there is big difference if you are drinking out of a can or a fountain; if it’s the former, the additional tax is 3 percent while the latter is taxed at 9 percent. Around for over a decade, this tax aims to curb obesity by making the usually larger fountain sodas more expensive to purchase.

9. Blueberries (Maine)

Maine produces 99 percent of the blueberries picked wildly in the nation. They also slap a one-and-a-half cent tax per pound on anyone growing, handling, processing, selling or purchasing blueberries. For what it’s worth, this tax is one of the oldest on our list: blueberry harvesters have been paying this tax since 1945.

8. Tan Tax (United States)

This infamous piece of “Obamacare” is a 10 percent federal tax on tanning bed services. Arguably attempting to discourage the using of these bed services, the tax does not apply to spray on services. For those who were hoping the “temporary” tax would be removed, the tax was made permanent in 2010.

7. Tattoos (Arkansas)

While this tax seems like it should be a relic of a different era, Arkansas implemented this 6 percent tax on permanent body art in 2005. If this incentivizes you to opt for that piercing you have been eyeing instead, you’re out of luck there too; body piercings and electrolysis are included .

6. A New Kind of Death Tax (Seattle)

Starting in 2011, it began to cost more for handling a death in Seattle. In addition to any estate tax you may face, it costs $50.00 to report a death to the Medical Examiner’s Office. If you don’t pay up, you won’t receive the necessary paper work for burial or cremation.

5. “Bagel” Tax (New York)

Was that bagel you’re eating sliced when you received it? If so, New York considers it a prepared food and adds an eight-cent tax to the bill. On the books for quite a while, New York took the step to start enforcing the tax in 2010, enraging New Yorkers and bagel store owners in particular. While eight pennies may not seem like a huge increase, one store owner is reporting he owes thousands of dollars in back taxes as a result!

4. Tethered Hot Air Balloon Rides (Kansas)

Going hot air balloon riding in Kansas? Well, if you’re scared to be blown away to OZ and opt to have your balloon tethered to the ground, then you are subject to local amusement park ride taxes. However, if you take a ride on the wild side and your hot air balloon ride is determined to be “untethered, piloted, and travels for some distance downwind of the launching point”, then you are considered to be partaking in air commerce and consequently your ride not subject to the tax.

3. Playing Card Tax (Alabama)

Beginning in 2004, Alabama imposes a 10-cent tax on each deck of cards that contains up to 54 cards. In addition, if you wish to sell a deck of cards, make sure you purchase your playing card privilege license before you do so.

2. “Luxury” Coffee Lids (Colorado)

In March 2010 Colorado eliminated a tax protection for “non-essential” packaging for food and drinks bought at restaurants and convenience stores. The move led to several interesting classifications including coffee cups being deemed essential while coffee lids were determined to not be. As a consequence, coffee shops are subject to (and, therefore, coffee drinkers must pay) a 2.9 percent luxury item tax on sleeves and lids.

1. The Non-Governmental “Jock Tax” (Tennessee)

This $2,500 per-game tax (max 3 games) tops the list despite not being quite as obviously strange as the other taxes. That’s because despite many states having so-called “jock taxes,” this is the only tax on the list where the money does not even go to the government – rather it heads to stadium owners who likely already benefitted from taxpayer-backed deals and own the team. If you thought government getting one more cent of your money was frustrating, this odd tax situation manages to add insult to injury.

This list should settle it once and for all, if you make it or do it, they will tax it.



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What Tax System Do Taxpayers Want?
Posted By: Dan Barrett - 08/08/13

For this year’s Milton Friedman Legacy Day activity, NTU Foundation asked taxpayers across the country what federal tax system they want. At our in-person event in downtown Washington, DC and online at our special voting page, we had over 650 total votes on if the current system should be kept or replaced with a FairTax, Flat Tax, National Transaction Tax, or a Value-Added Tax.

If you are unfamiliar with these tax systems, we had some fancy posters made to show the basic points and contentions associated with each (you can click on each to see the full resolution):

Here are the results broken down by those who attended our physical event and those voting via our survey online:

What Tax System Do Taxpayers Want?
Results from NTU Foundation's Special Milton Friedman Legacy Day Poll
Tax Reform
Event Votes
Online Votes
Percentage of Total
Note: Votes do not reflect total participation. Some participants did not vote.

Put another way, here's an infographic put together by our fantastic Creative Content Manager, Tim Howland:

What do these results mean? Probably a few things:

  • A consumption-based system is gaining steam across the country.
  • Folks in DC are more rooted in an income-based system.
  • Taxpayers are tired of the current system but don’t want alternatives that might increase compliance costs or complexity.

We need more information and more taxpayers in the network of voting and voicing their preferences. Stay tuned, we here at NTU Foundation are working on another survey to get a more clear idea on what people want out of their tax system.

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The Nation Remembers Milton Friedman
Posted By: Dan Barrett - 08/06/13

One of the best parts about this year's Milton Friedman Legacy Day was reading all of the comments that taxpayers left on our special online voting page. Along with asking folks to vote on which fundamental tax reform they want, NTU Foundation provided a space for respondents to talk about why Milton Friedman's teachings are still vital and what specifics he brought to the world that they liked. Here are a few:

"The videos he created to teach even the most complex issues of economics and the economy in ways that everybody could understand." –JJ, Ohio

"... His contention that free enterprise will allocate resources better than any central planners. One's self interest is not an evil thing, but the natural motivator of man." –Roger B, Michigan

"His glasses." – Daniel M, Texas

"His PBS series Free to Choose changed the way I think about economics and freedom." – Robert S, Indiana

"Friedman pushed for school choice and vouchers so that you can send your children to the best school and the school of your choice rather than the public school you are assigned.  The money goes with the child and not to the school.  Giving parents the choice to select the best schools for their children would improve education and provide competition among schools.  Educational freedom is a win-win for everyone." –Mary A, Florida

"His emphasis on free-enterprise: 'The only way that has ever been discovered to have a lot of people cooperate together voluntarily is through the free market. And that's why it's so essential to preserving individual freedom.' Milton Friedman" –Ted B, Washington

"Mr. Friedman was a deep thinker, whose thinking produced positive, logical, meaningful results." –Charles R, Oklahoma

"[His] open discussions on variants of taxing systems has opened the eyes of millions of previously uninformed people. So many have only believed that what we currently have is all there is in the world when it is relatively new in our Country's history. We CAN change an unfair system into a workable & sustainable modern system that ensures ALL have some vested interest in our future as a Country." –Jeff M, Florida

"Wherever practical, people should be free to choose for themselves." –John R, California

Thanks to everyone who send us their votes and thoughts on Friedman! The winners of the $50 iTunes gift cards will be announced shortly.

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Ac-“customed” to Waste?
Posted By: Pete Sepp - 08/05/13

All too many federal agencies can be cited for having budgetary skeletons in their closet, and U.S. Customs and Border Protection (CBP) is no exception. From poorly managing a drone fleet purchase, to making questionable demands for more employees, CBP has raised fears for the security of taxpayers’ wallets in the past. Yet, Congress has an opportunity to ease future fears, over a controversial new CBP project, before it can cause a fiscal fright.

Two years ago, the U.S. Department of Homeland Security (DHS) concluded a letter of intent with the United Arab Emirates to build a “pre-clearance” facility at Abu Dhabi airport which would allow travelers to the U.S. to clear customs before arriving on American soil. So far, so good: pre-clearance can not only save time and reduce congestion at U.S. points of entry, it can also help ease the way for tourists who contribute to economic activity while visiting here.

Now for the not-so-good:

  • According to Airlines for America statistics, Abu Dhabi airport accounted for less than 600 passenger arrivals per day to the U.S. in 2012, ranking it #80 on the list of top origin points to our country.
  • Right now, no U.S.-based carriers even fly from the Abu Dhabi International Airport back to here.  All other CBP pre-clearance zones in Canada, Ireland, and the Caribbean serve many airlines, including U.S.-flagged ones.
  • The primary beneficiary of the deal would be Etihad Airways, the state-owned airline of UAE. Thanks to this status Etihad enjoys an advantage over private airlines around the world that are subject to corporate profit taxes of their home countries. Which brings us to …
  • Another advantage conferred by the United States under the auspices of the Export-Import Bank (Ex-Im), whose risk-taking and subsidization have long been a concern for taxpayer advocates such as NTU. Etihad snagged $593 million in loan guarantees from Ex-Im last year for aircraft purchases, and could qualify for preferential financing that our own airlines (by definition) can’t get through Ex-Im.
  • Meanwhile, The Wall Street Journal is reporting that over the preceding year (before overblown sequester scare tactics), the wait times for getting through customs at stateside airports have “increased dramatically.”

All these drawbacks lead to one long question: Given CBP’s service challenges at existing airports, is it really a good idea to plow ahead with a facility whose use will be comparatively scarce in the near term, and give another leg-up to an airline backed by its own government as well as ours, at the expense of an already overtaxed flying public?

And “overtaxed” is an understatement. As NTU has often noted, the typical overall government tax and fee burden of 20 percent on a $300 domestic airfare is higher than the average effective rate a middle-class American is likely to pay on his or her 1040 income tax return. International air travelers can have it even worse, with impositions such as separate departure and arrival taxes along with a passenger agricultural inspection fee (which the Obama Administration ill-advisedly considered raising in 2009) and a customs fee.

Proponents of the CBP station at Abu Dhabi argue that the investment of U.S. tax dollars will be minimal since UAE will pick up 85 percent of the project’s expense under the current agreement. But that’s little comfort to tax-weary travelers in America (see above), who remain worried that whatever share they will be forced to commit could escalate if construction or operating costs are not contained. Meanwhile, there’s that pesky matter of how best to apply CBP’s fee collections as well as appropriations from general funds – should they be used to expedite higher-priority passenger and cargo entry-exit services?

Many Members of Congress seem to think so. In June, the House of Representatives passed an amended FY 2014 DHS Appropriations Bill specifically blocking the Abu Dhabi pre-clearance scheme. In May, a bi-partisan group of 11 Senators echoed the sentiment of their House colleagues in a separate letter to DHS Secretary Janet Napolitano, questioning whether the agency’s “decision was made as a result of a risk based analysis.”

Alas, earlier this month DHS announced it was moving forward with a data-sharing agreement that could pave the way for the facility’s activation, even as it faces a concerted petition effort from interested industry groups with considerable clout.

Regardless of the politics involved, the taxpayer aspects of the issue deserve further exploration – that goes not only for the Abu Dhabi pact but also the ever-troubling direction of the Ex-Im Bank. Allowing the free market and fiscal responsibility to sort out needs from niceties would provide some badly-needed bone-rattling for those accustomed to budgetary business as usual in Washington.

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A $46 Million Tax Refund?
Posted By: Michael Tasselmyer - 06/28/13

In a recent blog post, the Arlington County Taxpayers Association (ACTA) highlights a finding from the Treasury Department that in 2011, the IRS sent over $46 million in fraudulent tax returns to 23,994 recipients registered at a single Atlanta address.

A report from the Treasury Inspector General for Tax Administration also listed other instances of mass amounts of fradulent returns being sent to single addresses in Atlanta, including "11,284 refunds worth a combined $2,164,976 to... a second Atlanta address; 3,608 worth $2,691,448 to a third; and 2,386 worth $1,232,943 to a fourth," according to CNSNews.

The news comes in the wake of accusations that the tax-collecting agency may have unfairly targeted certain groups based on political factors. The errors apparently stemmed from innappropriate assignment of Individual Taxpayer Identification Numbers (ITIN) to questionable applications. According to the law, only those eligible to receive Social Security Numbers can receive an ITIN. Poor oversight and a lack of internal controls at the IRS lead to improper assignment of ITINs; in these cases, the errors were particularly costly.

For more, check out the ACTA's original post here.

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