Rep. Ratcliffe and Sen. Cruz Introduce Legislation to Dismantle the CFPB
Representative John Ratcliffe (R-Texas) and Senator Ted Cruz (R-Texas) introduced legislation this week to sunset the Consumer Financial Protection Bureau (CFPB). The twin bills, H.R. 3118 in the House and S. 1804 in the Senate would repeal title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Representative Ratcliffe explains, "The CFPB’s regulatory zeal has stripped American consumers and businesses of their freedom of choice and has limited their access to capital - all in the name of a 'we know best' attitude from Washington." Senator Cruz adds, "the agency continues to grow in power and magnitude without any accountability to Congress and the people.”
By introducing this legislation, Representative Ratcliffe and Senator Cruz are adding to a growing number of those calling attention to the wasteful nature of the CFPB. For instance, the CFPB's new Washington office will cost taxpayers $215 million and feature amenities such as a glass staircase, concession kiosk and a “water wall” ending in a splash pool. An ironic choice of decor for an agency designed to "empower consumers to take more control over their economic lives."
Such wasteful spending is no new development for the CFPB. In fact just a few years ago Judicial Watch found the Bureau had spent $4,500 to send attorneys to a “banking law fundamentals” class and was dishing out starting salaries as high as $173,000. Judicial Watch also found “a dozen new hires take home more than $225,000 a year, while a student intern was paid $51,620.”
The Bureau’s wasteful spending has largely gone unchecked due to an overall lack of oversight and accountability. The CFPB is not required to have their budget approved by Congress, unlike other government agencies. House Financial Services Chairman Jeb Hensarling (R-Texas) stated this makes the CFPB "unaccountable to taxpayers and to Congress."
Sadly wasteful spending is not the only problem plaguing the CFPB. Such waste is compounded by the fact that the Bureau imposes debilitating regulations and fees on small businesses. Recently, Americans for Tax Reform shed light on these issues, which are costing American financial institutions $24 billion in final rule costs and $61 million paperwork burden hours.
Luckily for American taxpayers, Representative Ratcliffe and Senator Cruz are working to reign in the unchecked and wasteful spending that has come to characterize the CFPB.
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Ted Eytan https://www.flickr.com/photos/taedc/
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Indiana Senate to Take Up House-passed Tax Hikes
What a difference a year makes. The American Conservative Union (ACU) recently awarded the Indiana House as the “Most Conservative House of Representatives” in the country, with ACU Chairman Matt Schlapp touting Indiana as a “beacon for conservatism.” ACU might consider revoking that award, as that legislative body recently approved multiple tax hikes, which include the following:
· House Bill 1002: A 30 percent increase in the state’s gas tax, taking the rate from 33.59 cents to 43.59 cents per gallon
· House Bill 1001: $1-per-pack cigarette tax increase, taking the rate from $0.995 to $1.995
After being hit with 20 federal Obamacare tax increases over the last eight years, the last thing hardworking Hoosier taxpayers need is to have lawmakers in Indianapolis pile on with further tax hikes at the state level, but that is what the Indiana House of Representative have done.
The Indiana Senate will take up these House-approved tax hikes next week. Hopefully, for Indiana taxpayers, the state senate is more adverse to tax hikes than their House counterparts.
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Drew Tarvin
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Wyden Calls for Capital Gains Tax Hike
While giving remarks at the liberal Tax Policy Center, Senate Finance Ranking Member Ron Wyden (D-Ore.) called for increasing taxes on capital gains by taxing it as ordinary income. Deriding the capital gains tax as a “loophole,” Wyden criticized GOP plans to reduce the rate, instead suggesting that they should be taxed at a top rate of 39.6 percent. As noted in his remarks:
“Of course, when you talk about the carried interest loophole, you’re talking about capital gains. And when you talk about capital gains, you’re talking about the biggest tax shelter of all – the one hiding in plain sight.
“Today the capital gains tax rate is 23.8 percent. Republicans want to make it 16 percent. So if you can take advantage of a gimmick that characterizes your income as a capital gain, your tax rate plummets. The White House and the majority party in Congress are working to make it even easier to get away with that gamesmanship.”
A goal of the left is higher taxes across the board and one of their favorite targets is hiking the capital gains tax. They do this because they know they can only raise the top ordinary income tax rate so much higher than it is today without wrecking the economy.
Often they see raising the cap gains tax in increments as the best way to achieve their long-term policy goal of higher taxes. One of their favorite targets is taxing carried interest capital gains as ordinary income. Despite the misleading rhetoric put out by the left, there is no difference between carried interest and any other income derived as a capital gain.
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Joe Frazier
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Philly Falling on Hard Times after Implementing Soda Tax
Back in June, Mayor Jim Kenney signed into law a city-wide tax on soda. Kenney claimed that it would promote public health all while funding a program to expand the city’s pre-k system, seemingly indifferent to the economic impact that it would have on Philadelphia residents and businesses.
The tax comes in the form of a 1.5 cent increase per every ounce of soda. The tax has increased the price of a 12-pack of soda by $2.16, directly affecting low and middle income families. Unsurprisingly, Philadelphia residents are by-passing their local stores in order to avoid the onerous tax, causing revenue to flow out of the city. Soda sales in the city have dropped between 30 to 50 percent since the tax has taken effect less than two months ago. This loss in revenue has many local retailers looking to cut the size of their workforce.
Brown’s Super Store, one of Philadelphia’s largest distributors of soda products is likely to cut around 20 percent of its employees due to the sharp decrease in profits. Some businesses have reported a drop in sales as large as 50 percent. This tax has single-handedly hurt middle class families, business incentive, and job creation.
In a Bloomberg interview, Jeff Brown, CEO of Brown Super Stores said, “I would describe the impact as nothing less than devastating."
Regardless of the clear economic distress that has been caused, Mayor Kenney is still under the illusion that the tax has been beneficial for the city. Kenney blamed the upcoming job cuts on retailers for not merely absorbing the added costs. During an interview with Philly.com, he stated, “I didn’t think it was possible for the soda industry to be any greedier.” Philadelphia’s out-of-touch mayor clearly has no conception of the most basic fundamentals of economics. Businesses actually need to make money in order to sell products and create jobs.
Yet, Mayor Kenney is proud of the $5.7 million that has been funneled into the city off the back of the soda tax. He continues to be unconcerned with the obvious toll this tax has already taken on retailers and Philadelphians alike. This is hardly the economic boost for the city that Kenney claimed it would be considering the massive job loss and burden it’s placed on families. The Philly soda tax fiasco is a sign of things to come if other cities make the mistake of using this as a model.
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Thomas Hawk
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Montana Takes Important Steps to Improve Public Safety
On Wednesday night, Montana Governor Steve Bullock signed four criminal justice reform bills that seek to cut costs and reduce recidivism.
The newly signed legislation will require the Office of Public Defender to put clients in touch with social workers, allow jail inmates free phone calls to their attorneys, eliminate the requirement to appoint a public defender for an unknown parent in child abuse cases, and allow criminal records for juvenile offenders to be shared electronically.
Prisons in Montana are significantly overcrowded due to high recidivism rates and the growing impact of substance abuse. Without new legislation, the prison population is projected to increase 13 percent by FY2023, requiring at least $51 million in new spending.
To address these concerns, the state Legislature created the Commission on Sentencing. After nearly two years of study, The Council of State Governments Justice Center announced their findings and brought 12 proposed bills to this legislative session.
“We want to think about how we can spend taxpayer money wisely to address these issues and have better outcomes for everybody,” State Sen. Cynthia Wolken said. “Not do what we’re doing now, which is address them in prison, where it’s the most expensive way to treat them.”
The commission’s proposals also include Senate Bills 63, and 64, which aim to change the rules of probation and parole in an effort to keep fewer people from being sent back to prison for minor infractions. According to the Justice Center report, key findings show that revocations account for a majority of prison admissions in Montana and that people are on probation for unusually lengthy periods of time. Reducing revocations for mere technical violations of probation and parole can help reduce the 74% of people in Montana’s correctional system due to revocation of their probation or parole.
“The bottom line is we’ve got to change our thought process,” said state Rep. Jimmy Patelis, a Republican from Billings who previously worked as Montana’s chief U.S. probation officer. “We cannot think that way anymore. We don’t have room, we don’t have the money, and really we need to become updated and innovative.”
There are additional bills designed to further increase public safety through more effective supervised parole and reentry. The additional bills focus on creating a professional, rather than volunteer, state Parole Board, and expanding the reach and improving the efficacy of programs focused on reducing recidivism.
The effective implementation of these reforms will avert nearly $70 million in costs by 2023.
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Drew Tarvin
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Downsizing the regulatory state will upsize the American economy
A recent study by the Phoenix Center on the cost of regulation to the American economy suggests the Trump Administration’s 2 for 1 Executive Order is making positive steps towards accelerating private sector growth and employment.
They show that a 10% reduction of the record breaking 81, 405 pages of regulations implemented since 2008 under the Obama administration would result in:
“$5.6 billion in annual savings, producing an additional $1.2 trillion in GDP over the next five years, or $244 billion annually.”
“A $45 gain for every $1 decline in the regulatory budget.”
“An annual increase of 3 million new private-sector jobs.”
The analysis found an inverse relationship between the size of the regulatory budget and economic growth. It concluded that the opportunity cost of one regulator was the equivalent of 138 private sector jobs and the financial cost, an $11 million annual loss to the US economy.
The size and scope of the federal regulatory state has become so expansive that it can be counted as a nation in and of itself, ranked as the world’s 10th largest economy behind Russia and ahead of India. This illusory economy has of course, come at the expense of the regulated, most of which are small businesses and their employees disproportionately impacted by regulatory excess. Small businesses, with 20 employees or less, currently face an annual regulatory cost that is 36% higher than large firms with 500 employees or more.
These regulations, combined with the financial capacity of large businesses to afford high compliance costs, have distorted the marketplace for 27.9 million small businesses who employ more than 50% of the American workforce. Gallup has since revealed the record breaking decrease of small businesses in operation alongside the increase in the number of firms that have shut down since 2008.
In dismantling the capacity for small firms to thrive, the expanse of regulator power has strangled job opportunities for the American workforce as 65% of net employment from 1995 has been created by small businesses.
The statistics suggest rescinding two regulations for every new regulation enacted is the first of many steps necessary to address the systemic flaws of the regulatory state. Although outcome-based legislation is key to sustaining a smart regulatory framework, policy makers have been offered an ample opportunity to repeal excessive mandated requirements that are stifling entrepreneurial activity.
Instead of adding to a burdensome and lifeless regulatory economy, the careful down scale of federal departments and their budgets will accelerate the life of American innovation, private sector growth and opportunities for the workforce.
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Pro-Growth Tax Reform Must Reduce Taxes on Capital Gains
The federal tax code is out of control. At more than 74,000 pages it is too long, too complicated and much too expensive for taxpayers. Comprehensive tax reform is imperative in 2017 and this must include reducing double taxation.
Here in the U.S. the same dollar is taxed when it is earned, invested, and yes even when you die. A key aspect of decreasing the effects of double taxation is reducing the capital gains and dividends tax.
To improve economic growth, lawmakers should reduce taxes on capital gains/dividends, continue to treat carried interest as a capital gain, protect section 1031 like-kind exchanges, and index capital gains taxes to inflation. These changes will help promote much needed investment incentive to reboot the economy. Here’s how:
(Read the Full Study Here)
Taxes on Capital Gains/Dividends Should Be Reduced
The capital gains and dividends tax is levied on income that has already been subjected to individual income taxes and is then reinvested into the economy in a way that increases productivity and economic growth.
Simply put, Obama’s policies have not worked and need to be changed. During his presidency he has raised the top capital gains rate from 15 to 20 percent and imposed a 3.8 percentage point surtax on capital gains. These polices have only resulted in putting U.S. businesses at a global disadvantage.
Among the 35 developed countries in the Organisation for Economic Development and BRICS, comprised of Brazil, Russia, India, China, and South Africa, the U.S. has some of the highest capital gains and dividends rates, coming just behind France.
To put it in perspective, the average OECD/Bric rate for distributions (includes corporate and state taxes) made as capital gains is 40.3 percent. This contrasts sharply with the U.S. rate that sits at 56.3 percent.
This trend is the same when dividend rates are averaged. OECD/BRICS have an average of 44.5 percent while the U.S. is 56. 2 percent.
Carried Interest Is and Should Be Treated as a Capital Gain
Some recent proposals have promoted taxing carried interest as ordinary income. Contrary to the common misconception that treating carried interest as a capital gain is a shady loophole, carried interest is actually the same as all other capital gains. It is simply the share of an investment partnership allocated to the investor. All of the income from the partnership is derived from a long-term investment in a business or real-estate. This means that all income earned is treated exactly the same as a capital gain.
Supporters of higher taxes on carried interest classify it as a matter of fairness when in reality it would hurt a wide range of investment partnerships such as pension funds, charities, and colleges. These partnerships rely on shared investments for their savings.
Additionally, increasing taxes on carried interest capital gains would only raise $19.6 billion over the next ten years, a miniscule number that barely fluctuates the $41.7 trillion that the Congressional Budget Office estimates will be raised throughout the upcoming decade.
Like-Kind Exchanges Should Be Preserved and Strengthened
Under current law, taxpayers are able to defer paying taxes on certain types of assets when they use those earnings to invest in another, similar asset because of the provisions set by Section 1031 of the tax code. This can be used on assets such as real estate, machinery for farming and mining, and other equipment such as trucks and cars.
Section 1031 eliminates unnecessary barriers that would impede investment. Allowing an investor to not have to pay taxes until they cash out promotes more efficient allocation of capital resources.
The House GOP “Better Way” blueprint takes the code in a pro-growth direction by implementing immediate full-business expensing, which streamlines business activity by allowing the effect purchase of new assets. Section 1031 compliments full expensing by letting businesses replace less productive assets with more productive assets.
Repealing section 1031 would only lead to higher taxes on investment, hurting economic growth and incomes.
Index Capital Gains to Inflation Through Treasury's Regulatory Authority
Indexing the capital gains tax to inflation is another pro-growth option for reform. The existing capital gains tax, without an inflation index, discourages long-term investment by exposing investors to higher inflation risk than short term investors. This essentially means that a long term investors have less incentive to invest than short term investors inhibiting a healthy, growing economy.
Without indexing capital gains taxes with inflation, long term investors are also subject to pay capital gains on real capital loses. This is why it is imperative that capital gains are measured with inflation, without the adjusted values the taxes on capital gains are not accurately evaluated.
To combat this issue, the Treasury should use its authority to interpret “cost” based on inflation. In the past the Treasury has advocated for the implementation of inflation based indexing on capital gains but was impeded by congress. Allowing the Treasury to interpret “costs” using inflation indexing would help create an even playing field for investors and promote investment incentives.
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ATR Opposes Rhode Island Carbon Tax (S. 365)
Americans for Tax Reform (ATR) sent the following letter to the Rhode Island General Assembly today urging state lawmakers to oppose Senate Bill 365, the "Energize Rhode Island: Clean Energy Investment and Carbon Pricing Act" of 2017.
Senate Bill 365 would impose a $15 per ton carbon tax in the state of Rhode Island that would increase $5 annually. Rhode Island lawmakers should oppose this costly and burdensome tax hike proposal which will increase the state's already high tax burden on businesses and consumers, and drive up energy costs for residents and businesses in the Ocean State.
Below is the full text of the letter, which can also be found here.
March 1, 2017
State of Rhode Island General Assembly
82 Smith Street
Providence, RI 02903
Dear Members of the Rhode Island General Assembly:
On behalf of Americans for Tax Reform I urge you to oppose Senate Bill 365, the “Energize Rhode Island: Clean Energy Investment and Carbon Pricing Act” of 2017, introduced by Senators Jeanine Calkin, Ana Quezada, James Seveney, Harold Metts, and Frank Lombardo.
Senate Bill 365 would impose a carbon tax on energy in the state at a rate of $15 per ton of emissions that will increase by $5 annually. Such a tax will reduce the state’s economic competitiveness by driving up the cost of energy, impacting jobs and increasing costs for Rhode Island’s most vulnerable.
Rhode Island’s tax climate was recently ranked 44th worst in the U.S. by the bipartisan Tax Foundation’s 2017 State Business Tax Climate Index, with some of the highest corporate, individual, and property tax rates in the country.
Rhode Island’s gas tax in 2016 was also ranked as the 9th highest in the country at 34 cents per gallon, on top of the federal rate of 18.4 cents. Estimates show Senate Bill 365 would add an additional tax of 15 cents per gallon of gas.
Studies show a carbon tax rate of $20 per ton in Rhode Island would result in the loss of worker income equivalent between 2,000 and 5,000 jobs, and would increase the cost of using natural gas in the state by 40 percent. Such an increase would drive up the cost of doing business in the Ocean State, and hit low-income households the hardest who spend a larger portion of their monthly income on energy costs.
I urge all members of the Rhode Island General Assembly to oppose Senate Bill 365.
Sincerely,
Grover G. Norquist
President
Americans for Tax Reform
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ATR Urges Congress to Repeal Section 541 of the Tax Code
Americans for Tax Reform today released a letter to Congress urging lawmakers to repeal Section 541 of the tax code. Section 541 is an outdated and unnecessary provision that imposes a personal holding company tax on certain businesses to prevent a loophole that no longer exists.
March 1, 2017
The Honorable Kevin Brady
Chairman, Committee on Ways and Means
U.S. House of Representatives
1102 Longworth House Office Building
Washington, D.C. 20515
Dear Chairman Brady:
One of the guiding principles of pro-growth tax reform must be simplification of the code for both businesses and families. As Congress works toward reform, one section of the code that should be repealed is Section 541, an outdated and unnecessary provision that imposes a personal holding company tax on certain businesses to prevent a loophole that no longer exists.
At around 75,000 pages in the length, it is unquestionable that the code is too complex. Each year, American families and businesses spend more than 8.9 billion hours and $400 billion complying with the code. Unsurprisingly, the majority of Americans support simplifying the tax code.
Simplification of the code should include removing the numerous unnecessary provisions such as the Death Tax, the Alternative Minimum Tax, and many of the distortionary tax credits. While this process sounds straightforward, in reality there are numerous sections of the code that can – and should be repealed as part of tax simplification.
One part of the code that should be repealed is Section 541. Section 541 serves little purpose, is often unknown amongst tax experts, and today serves solely as a trap for unwary taxpayers.
When it was enacted into law nearly 80 years ago, Section 541 was intended to address a potential loophole in the code where taxpayers would retain assets in a corporate entity rather than distributing them to the (and paying taxes at) the individual level.
At the time, there was clear incentive to do this – the top individual income tax rate approached 80 percent, while the top corporate income tax rate was as low as 20 percent. Today, no such discrepancy between individual and corporate rates exists.
The provision imposes an additional 20 percent in taxes if 60 percent of a business’s AGI is passive income and if more than 50 percent of the corporation’s stock is owned by five or fewer individuals. As a result, the only taxpayers hit by Section 541 are those who are unaware of the law and have made innocuous business choices, yet they are needlessly punished with a higher tax burden.
As you consider overhauling the code through dramatic simplification, I urge you to consider including repeal of Section 541. The fact, is the current code is too complex and burdensome for American families and businesses because of provisions like Section 541.
Onward,
Grover G. Norquist
President, Americans for Tax Reform
Trump Promises “Historic” Tax Reform
In his first address to a joint session of Congress, President Donald Trump promised “historic” tax reform that will allow American businesses to compete, will reduce rates and complexity for American families, and will grow the economy.
It has been more than 30 years since comprehensive tax reform was last signed into law. Since then, our tax code has almost tripled in size. Today, the status quo of the current tax system is unacceptable and indefensible. Tax reform is desperately needed.
The code is far too complex for American families to understand. The tax code is more than 75,000 pages long and contains over 2.4 million words. This complexity forces American families and businesses to spend more than 8.9 billion hours and $400 billion complying with the code every year.
The US tax code is also the most uncompetitive in the world. The outdated code makes it difficult, if not impossible for businesses to compete with foreign competitors. The federal/state corporate tax rate is almost 40 percent, while small businesses pay rates above 40 percent. By comparison, the average rate in the developed world is just 25 percent. The tax rate has barely changed since 1986 while other countries have cut their rates aggressively. The U.S. is also one of the few countries that still has a worldwide system of taxation, which subjects American businesses to double taxation when they do business overseas.
The tax code is suppressing the economy. Over the next decade, the Congressional Budget Office projects the economy will continue to grow at a stagnant 2 percent, far below the historical average. This insufficiently low economic growth has resulted in too few new jobs and low wages.
President Trump has shown he understands the need for tax reform. In his first year in office, he must continue pushing for desperately needed pro-growth reform.
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Gage Skidmore
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Healthcare Reform Must Repeal All Obamacare Taxes and Strengthen HSAs
Obamacare has failed. The law has led to higher healthcare costs, cancelled plans, and more than one trillion in tax increases which hit millions of middle class families. It is imperative that Congress moves forward with repealing Obamacare and replacing it with patient centered, free market healthcare reforms, like those outlined in the “Better Way” Healthcare plan.
As Congress moves forward with legislation, lawmakers should prioritize several important changes to the tax code.
First, it is imperative that repeal of Obamacare results in the repeal of ALL Obamacare taxes.
Second, policymakers should use the tax code to increase individual choice and freedom Americans have over healthcare through strengthening tax preferred savings accounts. Both policy changes should be key components of any transformation of the American healthcare system.
Repeal is A Giant Tax Cut for American Families and Businesses: There are nearly 20 new or higher taxes that hit middle class families, raise the cost of healthcare, and reduce access to care in Obamacare. In total, these taxes exceed one trillion dollars ($1,000,000,000,000) over a decade.
The law imposes a tax on employer provided care, a tax on innovative medicines, a tax for failing to buy government-mandated insurance, a new tax on health insurance, a tax on medical devices, taxes on Health Savings Accounts and Flexible Spending Accounts, and even a tax hike on Americans facing high medical bills.
Repealing these taxes will provide much needed relief to the paychecks of families across the country. Repealing Obamacare will also undo former President Barack Obama’s broken promise not to sign “any form of tax increase” on any middle class American family.
Health Savings Accounts Should Be Expanded: When it was signed into law, Obamacare contained several provisions to restrict tax advantaged Health Savings Accounts. For instance, the law prevented families from using HSA dollars to purchase over-the counter medicines, imposed a cap on Flexible Spending Accounts, and implemented an early withdrawal tax hike on HSA users.
Lawmakers should not only prioritize repeal of provisions that limit HSAs – they should also implement proposals that expand and strengthen savings accounts.
HSAs are a key component to ensuring Americans have access to patient centered health care that best fits their needs and keeps costs low. Healthcare costs are usually paid indirectly by Americans, but HSAs give families direct control to use funds as they see fit. In turn, this increases the ability of Americans to use these funds in a way that is most efficient and appropriate for the individual.
One path forward should be adopting the proposals outlined in the House Republican “Better Way” Healthcare blueprint. This plan expands HSAs to new groups like veterans and Native American Indians, dramatically increases the contribution limits for HSAs so they can be relied on to cover more medical costs, ties tax credits to savings accounts, and exempts HSAs from the high level cap on employer provided insurance. In concert with other reforms in the blueprint, including a more efficient age-adjusted, advanced refundable tax credit, HSAs serve as an important tool toward granting Americans increased choice, lower costs, and greater access.
These are commonsense, yet important changes to HSAs and will have a drastic effect in increasing patient choice and decreasing healthcare costs.
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https://www.flickr.com/photos/68751915@N05/
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