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Virginia Gov. McDonnell’s Tax Hike Plan Reaches ‘Taxpayer Nightmare’ Status
Posted By: Lee Schalk - 02/20/13

Thanks to leaders in the Virginia House and Senate, Governor McDonnell’s transportation funding scheme has gone from bad to worse. Just weeks ago, I detailed why McDonnell’s billion dollar tax hike was a bad idea. Here’s how it just got worse.

Instead of scrapping the gas tax, the plan now includes a 3.5 percent wholesale gas tax and a 6 percent wholesale tax on diesel fuel. Additional car taxes abound – a $100 annual “fee” for Virginians with cars that run on alternative fuels and a motor vehicle sales tax hike from 3 to 4 percent. All retails sales will be taxed at a higher rate of 5.3 percent (the current rate is 5 percent).

In order for McDonnell and his cronies to make this multi-billion dollar tax hike a reality, they are relying on Congressional passage of dangerous online sales tax legislation to reach even deeper into taxpayers’ wallets. Passage of the so-called Marketplace Fairness Act would make Virginia part of a predatory tax collection scheme that will ultimately hurt small Internet-based businesses and, undermine the principles of tax competition that have benefitted the Commonwealth.

But what if this federal legislation fails to become law? Well, then taxes are going up…again. The latest proposal states that if the Marketplace Fairness Act fails, the wholesale gas tax will jump from 3.5 to 5.1 percent.

Governor McDonnell’s plan thankfully avoids an income tax boost, but given the bevy of tax increases it includes, this plan must be adamantly opposed by Virginia taxpayers. As leaders in states like Louisiana and North Carolina seek pro-growth, revenue-neutral tax reform, it is especially disconcerting to see Richmond pushing a 5-year, $6.1 billion tax increase.

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Money Walks, and Here's Proof
Posted By: Brandon Arnold - 02/19/13

Just a few weeks ago, Phil Mickelson made headlines when he said he might pack up his golf clubs and move out of California.  The reason for his possible move? In November, California voters approved a ballot measure that pushed its already high top income tax rate from 10.3 percent to 13.3 percent – now the highest in the nation.  This means that Mickelson might be one of many high-earners leaving the Golden State.

To better understand California’s problem, look at nearby states like Nevada and Washington where there is no state income tax. And to Arizona, where the top rate is a relatively low 4.54 percent.  These states have far better business tax climates than California, too.  The Tax Foundation says California’s climate is the third-worst in the nation. By contrast, Nevada’s is the third-best and Washington’s is the sixth-best.

What are the effects of this huge tax disparity between California and other states in the region?  Thanks to research by Travis Brown and his book, How Money Walks, we’re finding out.  Travis has tracked the flow of wealth and population over the past 15 years to find where people – and their bank accounts – are moving.

His research suggests to us that California’s high tax rates have had a significant impact on wealth migration and that Mickelson’s potential move would be part of an ongoing trend.  From 1995 to 2010, the Golden State has experienced a net wealth loss of $37.8 billion.  The bulk of that money is moving to states with low or no income taxes, like the aforementioned Nevada ($8.2 billion), Arizona ($6.3 billion) and Washington ($3.9 billion).  Even no-income tax states that are much farther away like Texas ($4.8 billion) and Florida ($2 billion) are drawing considerable wealth away from California.

Speaking of Florida, a state with no income tax and the fifth-best business tax climate, it has been a major beneficiary of poor tax policies in other states. Over the same 15 year period that witnessed an exodus of wealth and population from California, Florida gained $86.4 billion in wealth and more than 900,000 residents. The majority of these dollars and people are coming from high-tax states like New York, New Jersey and Illinois.

Across the country, many states are considering major tax reform measures in 2013.  Policymakers should study the research at www.HowMoneyWalks.com before they enact any changes and learn about how low tax rates could help their state attract wealth.  

To learn more, please watch this brief video clip featuring NTU’s Pete Sepp and Travis Brown.

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Internet Tax Bill Would Undermine Constitution
Posted By: Brandon Arnold - 02/15/13

Did you buy something online for your Valentine yesterday? Perhaps some chocolates or flowers? Well, if some Members of Congress get their way, you could soon see the cost of these items – and everything else you purchase on the internet – increase significantly.

That’s because a group of bipartisan politicians just introduced the so-called Marketplace Fairness Act, which would enable state tax collectors to reach into the wallets of out-of-state consumers who make purchases on the Internet. This would run counter to the Constitution’s Commerce Clause, which gives the federal government, not the states, the ability to regulate interstate commerce. This important provision means that the United States is essentially a huge "free trade zone." It’s the reason why you don’t have to pass through customs, declare your purchases and pay levies whenever you cross state lines. In short, the Commerce Clause and the accompanying free-flow of goods, services and people are key reasons why the United States has become the richest nation in the world. The MFA chips away at the very foundation of the Commerce Clause by granting state tax collectors with unprecedented authority to assess taxes in other states.

Supporters of MFA have argued that this is a matter of fairness and that individuals are taking advantage of a tax "loophole" by making purchases online. As my colleague, Nan Swift points out in a recent paper, these arguments are quite simply false. The so-called "loophole" is actually a safeguard that, as she states, "helps to protect taxpayers from many types of aggressive policies that could affect income, property and other taxes."

For more on NTU’s opposition to the MFA, please click here.

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Should Success Be Punished with Higher Taxes?
Posted By: Brandon Arnold - 02/01/13

ExxonMobil released some good news today – its profits have reached a five-year high. Exxon’s competitor Chevron also experienced a large fourth quarter bump in earnings.  But before employees and shareholders start popping champagne corks, they should keep a close eye on Washington DC.

Already, politicians are seizing upon this news as an opportunity to raise taxes on “Big Oil.”  Both White House press secretary Jay Carney and Senate Majority Leader Harry Reid have suggested that these just-announced profit figures could create a better political opportunity to raise taxes on the industry.

They would do so by eliminating a so-called tax loophole for oil and gas companies.  Of course, this loophole isn’t really a loophole at all. It’s a broad-based manufacturing tax deduction that is utilized by virtually every company in the Dow Jones index.  The deduction should probably be eliminated altogether as part of comprehensive tax reform in which credits and deductions are scrapped and the rate lowered for all companies.  But that’s not what the White House and Reid are talking about here.  Instead, they want to single out one industry to punish it for being successful.  They would keep the manufacturing deductuion for all companies except those in the oil and gas industry.

If the oil industry wanted to curry favor with tax-hike proponents, it would probably be better off losing scads of money and rocketing towards bankruptcy.  In that case, they might become the beneficiary of a large taxpayer-funded bailout.  Instead, they could see their taxes raised dramatically as a punishment for making profitable business decisions.

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Speaking of Taxpayers, Jan. 25: This is your Tax Code on “Obamacare”, with Dan Pilla
Posted By:  - 01/27/13

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Tax compliance expert and taxpayer advocate Dan Pilla joins the podcast to discuss tax complexity and his report detailing some of the new dangers "Obamacare" will throw at taxpayers this year; plus the Outrage of the Week!
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The Late Edition: January 24, 2013
Posted By:  - 01/24/13

Today’s Taxpayer News!

Check out this Huff Po article explaining the support of a wide range of groups, including NTU, for the The Mulvaney-Frank amendment which freezes Pentagon spending at current levels.

This commentary piece from Bloomberg takes a look at various actions Congress could take to simplify the tax process for businesses.

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Tiger Woods & Phil Mickelson Take a Swing at Never-ending Tax Hikes on Rich
Posted By: Douglas Kellogg - 01/24/13

A recent high-profile refugee from the Golden State’s excessive tax burden is professional golfer Phil Mickelson. Mickelson expressed his displeasure with California’s recent tax hike binge, saying he would have to make changes in response to the new rates, and received some backlash for his opinions.

In an interesting sign of taxpayer solidarity, Tiger Woods was asked about Mickelson’s comments and backed up his tour colleague’s feelings on the matter, saying: “I moved out of here back in ’96 for that reason. I enjoy Florida, but I also understand what I think he was trying to say. I think he’ll probably explain it in a little more detail.”

A heartwarming sign for taxpayers feeling the heat as governments at every level largely fail to manage their budgets responsibly.

As Forbes Contributor Robert W. Wood noted, athletes and entertainers are usually taxed excessively no matter which state they hail from, but successful California residents are subjected to a whole host of additional taxes:

When you are a resident–as Mickelson is of California at least for now–you get taxed on everything. Most PGA Tour players live in no-tax states like Florida or Texas. Controversially, California residents voted in November to raise tax rates to 13.3% from 10.3% for those making more than $1 million. Still, Mr. Mickelson was measured in his remarks. Many are much less so and headed for the exits.

On the East coast, Maryland presents another example of how harsh tax rates on the so-called “rich” drive upper income earners away and leave revenue-hungry states with even less to fund their budgets. The Wall Street Journal takes a closer look at how the Old Line State’s misguided fiscal policies have shrunk, not swelled, the state’s treasury.  

One-third of the millionaires have disappeared from Maryland tax rolls. In 2008 roughly 3,000 million-dollar income tax returns were filed by the end of April. This year there were 2,000, which the state comptroller's office concedes is a "substantial decline." On those missing returns, the government collects 6.25% of nothing. Instead of the state coffers gaining the extra $106 million the politicians predicted, millionaires paid $100 million less in taxes than they did last year -- even at higher rates.

Will fiscally irresponsible lawmakers ever stop playing “whack-a-millionaire” and get their budgets in order? Hopefully high profile examples of the damage these punitive tax hikes cause will force them to start controlling spending.

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The Late Edition: January 23, 2013
Posted By:  - 01/23/13

Today’s Taxpayer News!

Today NTU wrote a letter in support of Representative Bob Goodlatte’s "Tax Code Termination" Act (H.R. 352), which would phase out the current complicated Internal Revenue Code and work towards a simpler system.  

Last week, a federal judge ruled that the IRS cannot force tax preparers to take a competency exam in order to continue offering their services. The decision is a win for tax preparers who would have had to endure burdensome new regulations, and for taxpayers, many of whom seek out experienced professionals to help them with their taxes. 

Check out this infographic from the Economic Policy Journal visually illustrating the payroll tax hike all working Americans are now subjected to.

Payroll tax hike

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Late Edition, January 21: Beer Tax?! Just when you thought it couldn't get worse
Posted By: Douglas Kellogg - 01/21/13

Today’s Taxpayer News!

Pete Sepp explains the many issues affiliated with Community Oriented Policing Services (COPS) grants in this Atlanta Journal-Constitution article.

New Hampshire’s proposed 33 percent beer tax has left businesses uneasy about what that would mean for sales according to the Sentinel and Enterprise.

Sen. Charles Schumer says Senate Democrats will be passing a budget this year (for the first time in four years) and it will include tax increases, according to the Washington Examiner.

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Speaking of Taxpayers, Jan. 18: Congress’ Start on Spending; State Update
Posted By:  - 01/21/13

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NTUF's Dan Barrett discusses the latest Taxpayer's Tab and what spending bills have already been introduced in the new Congress, as well as how much savings Congress failed to pass last year. NTU State Affairs Manager Lee Schalk delivers an action-packed update on state fiscal legislation; and the Outrage of the Week!

   

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