While Harry Reid and Senate Democrats are off trying to use taxpayer money to essentially bribe support for their health care reform bill, the Republicans are in attack mode.
Republicans are questioning whether the bill would lead us to government-run health care, questioning the bill's financing (higher taxes and Medicare cuts), and also pointing out the fact that the bill does not result in insurance coverage of 100 percent of the population.
And that latter point brings up something that I just had to laugh and shake my head at when I saw it coming from the Republican talking points.
The GOP talking points are currently throwing around the fact that 24 million Americans would remain uninsured even if this Reid health care bill was put into law. What they won't tell you though is that about 1/3 of these 24 million are illegal immigrants, a group that most Republicans have fought to prevent from receiving any taxpayer-funded health insurance coverage. Had the bill actually covered those 7-8 million illegal immigrants, Republicans would be shouting that fact from the rooftops (or maybe just the House chamber).
Of all the changes from the Senate Finance Committee bill to the final Senate bill, the most annoying from a tax adminstrator's perspective must be the complexification of the Medicare tax. Now a simple 2.9% of salary goes to Medicare (1.45% employee portion; 1.45% employer). No matter who the person is or how much he makes. No tax authority has to find out anything about the wage-earner: married or not, kids or not, it doesn't matter -- 2.9%.
In search of more tax revenue, Sen. Reid decided that was too simple to administer. Instead of leaving the 'Cadillac tax' to raise the revenue, he bowed to pressure and did even worse by turning to the Medicare tax. Not only will this system that has had one simple rate for decades have a new, higher rate tacked on to the top end. The threshold for paying that top rate will depend on the wages of the couple if the worker is married. Did the senators or their staff not think through how that complicates the administration of the tax? Can we not have one easily adminstrable tax?
Sen. Harry Reid and Senate Democrats last night unveiled their health care reform bill, and late last night, the Congressional Budget Office released its report on the proposed piece of legislation. The gross price tag for the coverage provisions is $848 billion. It would cut the deficit by $130 billion if fully enacted, according to CBO estimates. The main financing mechanisms would be cuts to Medicare, a new excise tax on high-valued "Cadillac" health insurance plans, a 1/2 percentage point increase in the Medicare tax rate for high-income earners, and various tax hikes imposed on the health care sector including fees on manufacturers and insurance companies.
The pie chart below outlines the main categories of financing for the $848 billion bill (plus the $130 billion to finance deficit reduction).
The health care reform bill put forth by Senate Majority Leader Harry Reid and other Senate Democrats this evening will raise the bulk of its revenue via an excise tax high-valued health insurance (scaled down from the Baucus bill), along with an increased tax on Medicare for high-income wage earners and various fees on health care manufacturers.
The bill's title is the "Patient Protection And Affordable Care Act."
The JCT score is available here. Here's the list of tax increases (score):
40% excise tax on health coverage in excess of $8,500/$23,000 indexed for inflation by CPI-U plus 1% and increased thresholds for over age 55 retirees or certain high-risk professions; levied at insurer level; employer aggregates and issues information return for insurers indicating amount subject to the excise tax; nondeductible($149.1 billion)
Conform the definition of medical expenses for health savings accounts, Archer MSAs, health flexible spending arrangements, and health reimbursement arrangements to the definition of the itemized deduction for medical expenses (excluding over-the-counter medicines prescribed by a physician) ($5.0 billion)
Increase the penalty for nonqualified health savings account distributions to 20% ($1.3 billion)
Limit health flexible spending arrangements in cafeteria plans to $2,500 ($14.6 billion)
Require information reporting on payments to corporations ($17.1 billion)
Additional requirements for section 501(c)(3) hospitals (Negligible)
Impose annual fee on manufacturers and importers of branded drugs ($22.2 billion)
Impose annual fee on manufacturers and importers of certain medical devices ($19.3 billion)
Impose annual fee on health insurance providers ($60.4 billion)
Eliminate deduction for expenses allocable to Medicare Part D subsidy ($5.4 billion)
Raise 7.5% AGI floor on medical expenses deduction to 10%; AGI floor for individuals age 65 and older (and their spouses) remains at 7.5% (sunset 12/31/16) ($15.2 billion)
$500,000 deduction limitation on taxable year remuneration to officers, employees, directors, and service providers of covered health insurance providers ($0.6 billion)
Additional 0.5% hospital insurance tax on wages in excess of $200,000 ($250,000 joint) ($53.8 billion)
Modification of section 833 treatment of certain health organizations ($0.4 billion)
Impose 5% excise tax on cosmetic surgery and similar procedures ($5.8 billion)
"One of the really challenging aspects of this recession for states has been that many of the tools that states use to manage these recessions tend to be short-term tools, whether it be borrowing some money, putting off paying bills, temporary tax increases, temporary spending cuts - things that will hopefully get them through a year or get them through a couple years until the economy turns around," Urahn says. "One of the characteristics of this recession has been it's going to generate what looks like a relatively long recovery period."
The D.C. city government has launched a campaign to make people aware of the new tax on plastic bags going into effect on January 1, 2010:
Beginning January 1, 2010, District businesses that sell food or alcohol must charge you 5 cents for each disposable paper or plastic carryout bag.
The business keeps 1 cent, or 2 cents if it offers a rebate when you bring your own bag. And the remaining 3 or 4 cents go to the new Anacostia River Protection Fund. DDOE will administer this fund. We will use it to provide reusable bags, educate the public about litter, and clean up the river.
The District has also partnered with CVS/pharmacy to produce and hand out 112,000 reusable bags.
Putting to one side the question of whether a tax on some plastic bags to fund trash cleanup for one area is wise public policy, the new charge is properly called a selective excise tax. The bill may call the charge a fee, but it's a tax. If it were up to legislatures, few things would be called "taxes," and loose definitions help deprive taxpayer protection provisions of any meaning.
A fee funds services directed at those who pay it, or pays for regulating their conduct. Taxes produce surplus revenue for general government programs. Since the latter is what is happening here (most of the trash in the Anacostia is not plastic bags, and plastic bags pollute other things), it is a tax.
Because American antipathy to taxes is so deeply rooted in our nation's history, lawmakers often seek to raise revenue in ways to avoid the "tax hiker" label even if it requires calling an obvious tax a "fee." That's what's happening here. These shell games undermine transparency by making it harder for citizens to understand the cost of government.
If Gov. David Paterson and state legislators continue to do nothing about the way they spend money, the state’s general bank account will be $1 billion short at the end of December, according to state Comptroller Thomas DiNapoli, the man who writes the checks.[...]
The state has already dipped into its short-term investment pool, or cash reserves, for $5 billion. There is not enough left to raid.
It is an option for the state to borrow money, but DiNapoli says the state has borrowed enough for cash-flow emergencies.
In fact, the state already owes $10.4 billion to bondholders for the times it borrowed money for operating expenses. That’s 18 percent of the total $57 billion in state debt.
New York also benefits from taxes on high-income taxpayers, and their income is largely dependent upon the value of investments that fell sharply in the stock market decline, said Natasha Altamirano, spokeswoman for the national group, The Tax Foundation.
"'Millionaire’s taxes' are not stable sources of revenue," Altamirano said. "When there’s a stock market problem or an economic downturn, those revenues will also plummet."
Cigarette sales have fallen sharply across Florida since a $1-a-pack tax increase took effect July 1, plunging nearly 50 percent in some counties.
Statewide, cigarette sales that regularly topped 100 million packs per month dropped to 73 million packs the month the tax became law. Since then, sales have inched back to around 78 million packs but remain well below prior levels.[...]
The most dramatic decline in cigarette sales was in Miami-Dade County. In June, the month before the higher tax took effect, retailers and convenience stores sold 8.9 million packs; a month later, 4.4 million. Sales since rose to 6 million packs in September, the latest month for which county-by-county information is available.
Cigarettes sales in Broward and Palm Beach counties both saw a similar initial decline - evidence of sticker shock among smokers - and then recovered a bit. Broward's monthly clip of about 6.5 million packs now is below 6 million packs a month. Palm Beach County sales dropped from around 5.5 million packs to 4 million.
The article quotes Rep. Jim Waldman, D-Coconut Creek as celebrating the drop-off and urging another tax increase to coerce more smokers into quitting. Of course, if Rep. Waldman thinks cigarettes have no benefits or at least inflicts enormous costs on society, I'm not sure why he thinks a $1 or $2 tax is the appropriate government response. Just part of the craziness of using the tax code for shaping society in your own image, I suppose.
Some retailers think the drop-off isn't due to people quitting:
At Mike's Beer Barn in Tallahassee, whose owner lobbied for cigarette manufacturers, customers haven't necessarily given up smoking, but they switched to cheaper brands, said general manager Dan Felger.
Instead of buying Marlboros - now $6.29 a pack - more are opting for little cigars that sell for $1.50 a pack or low-cost Dosal cigarettes, on special at two packs for $7.
Barney Bishop, president of the Associated Industries of Florida, which fought the cigarette tax increase, conceded the tax might persuade some smokers to quit, but he said many more will simply get creative. Smokers will stock up during trips to low-cost states, he said, or buy cigarettes tax-free over the Internet. Border counties have seen some of the sharpest declines in cigarette sales.
More on cigarette border shopping and smuggling, including Arkansas's novel solution, here, here, and here.
Those of you who are football fans know by now what happened on Sunday night. Bill Belichick, the head coach of the New England Patriots, made a decision to "go for it" on 4th down (4th and 2) on his own 29 yard line when up by 6 points with a little over 2 minutes remaining. On the 4th down play, the Patriots came up short (because a player either couldn't catch the ball properly or the side judge made a bad spot), turned the ball over to a Peyton Manning-led Colts offense who scored a touchdown and won the game by 1 point.
Virtually, the entire sports talk universe has called Belichick out for his decision to go for it on 4th down as opposed to punting the football. However, it's pretty evident that the degree of opposition to Belichick's decision amongst the sports public and even so-called football experts is disproportionately high compared to the true probability that Belichick's decision would fail. In fact, a few statistical geeks have even suggested that Belichick made the correct decision under the criterion that head coaches are supposed to use: maximize the probability of your team winning. But in reality, most coaches would have punted the football.
Interesting you may say, but what does this have to do with economic policy?
The type of response we see to Coach Belichick's decision is too often what we also see in public policy debates: there is a bias for what is seen versus what is not seen. One can easily blame Belichick's decision for the Patriots losing the game. But there was still a significant probability that the Patriots would have lost the game had he made the opposite decision and punted. And even though the probabilities of winning under either decision may have been the same (or Belichick may have even made the right decision from a probability perspective), Belichick would not have been blamed had he punted and the Patriots still lost. In summary, even though a given decision may be 50/50 from the perspective of maximizing the team's chances to win, there is an asymmetry in terms of the payoffs from the coach's perspective. In other words, as Steven Levitt pointed out, we have a principle-agent problem where the self-interests of the head coach are not aligned with the interest of the team (i.e. winning the game).
This is the same reason the FDA is more likely to disapprove a healthy drug than approve an unhealthy drug. If the FDA approves a drug that kills people, the media and the general public will go crazy. But they don't see the fact that every year, the FDA is disapproving relatively healthy drugs and costing lives. And it's why politicians would rather have a tax code that uses tax credits that favor one industry over another at the expense of higher taxes on others. Everyone sees the benefits of the tax credits helping Industry A (and politicians will be there at the ribbon-cutting ceremonies to take credit for "creating jobs"), but the public doesn't see the higher taxes on Industries B, C, and D. It's also why the public supports significant restrictions on international trade. A factory closing in Ohio can be easily blamed on cheap foreign labor because the link of causation is rather short (the factory moves to Mexico or Asia). But the benefits of that cheap foreign labor (like lower prices for consumers and higher productivity) aren't seen by customers as being derived from that free trade policy.
Or the best example may be sticking with the sports world. New sports stadiums are often cited by those in the sports community for their apparent "economic impact" on regional economic growth. But what those advocates never talk about is that the resources devoted to building a sports stadium are resources diverted from more productive economic uses.
Our Tax Counsel and Director of State Projects Joseph Henchman will be speaking at a roundtable event hosted by the America's Future Foundation in Pittsburgh. The event information:
Stopping the Spending A Roundtable Discussion
Wednesday, November 18
Rivers Club, One Oxford Centre, Pittsburgh, PA
Reception at 6:00 pm & Roundtable begins 7:00 pm Drinks & Hors D' Oeuvres
Panel Description: Please join us for the inaugural America's Future Foundation event in Pittsburgh. The Americas Future Foundation is a nonprofit organization based in Washington DC that is dedicated to developing future conservative and libertarian leaders. We are an organization that brings people together to discuss ideas and develop professional skills.
For this event we will discuss: What can we do to get government spending under control? What lies ahead with an economic crisis continuing and state budgets in Pennsylvania and around the country continually falling short. With a single-payer healthcare package on the floor, stimulus funding and the largest national deficit the US has ever seen, what is the future of freedom and fiscal responsibility?
Have libertarians and conservatives found their voice through the turmoil of the economy? With a plummeting economy, do free market ideas stand a chance? Have Republicans discovered a comeback strategy based on ideas that libertarians and conservatives can support?
Panelists: -Nathan Benefield, Director of Policy Research, The Commonwealth Foundation -Matt Gabler, Pennsylvania State Representative (75th District) -Mark Harris, Campaign Manager, Toomey for Senate -Joe Henchman, Tax Counsel and Director of State Projects, the Tax Foundation -Moderated by: Dan Garcia, Chair, Young Republicans of Allegheny County
To RSVP for this event please e-mail Denise Chaykun at denise [at] americasfuture.org.
In 39 states, the combined top tax rate would be over 50% (shown in yellow and blue). In 8 states, the combined top tax rate would be over 55% (shown in blue)
Tax Foundation President Scott Hodge appeared on Fox News Channel's "Your World with Neil Cavuto" today to discuss the recent trend among states enacting health care-related taxes, specifically hospital or provider taxes. Twenty-two states have hospital or significant provider taxes, including seven that were enacted or expanded in the past year and another five that have recently proposed enacting or expanding such taxes:
New York isn't the only state becoming creative with their automobile registration. An Arizona tax panel has recommended to Gov. Jan Brewer an "opt-out" provision to fund state parks. Residents of Arizona would automatically be registered to pay an additional fee for $14 or $15 dollars when registering their vehicle. Residents would then be allowed free entry to all the state parks but remain liable for additional fees.
Standard economic theory would say that there is no real difference between an opt-out or opt-in provision. In reality there is a large volume of literature in behavior economics that shows such programs do have real effects. The popular book Nudge has pushed for such policies referring to them as "libertarian paternalism". The concept behind "libertarian paternalism" is that public policy should use cognitive biases, such as framing effects and default bias, to influence peoples' behavior. While, at the same time, 'libertarian paternalism" would allow individuals to opt out of such behavior.
The Center on Budget and Policy Priorities (CBPP) doesn't even seem to be trying lately, as evidenced by the titles of their recent reports:
Increasing Medicare Tax on High-Wage Earners Could Help Pay for Health Reform
Curbing Flexible Spending Accounts Could Help Pay For Health Care Reform
Taxing High-Sugar Soft Drinks Could Help Pay For Health Care Reform
Reversing the Erosion in Alcohol Taxes Could Help Pay for Health Care Reform
Reducing Medicaid and Medicare Drug Costs Could Help Pay For Health Reform
Maintaining Current Value of Itemized Deductions For High-Income Taxpayers Could Help Pay For Health Care Reform
An Excise Tax on Insurers Offering High-Cost Plans Can Help Pay for Health Reform
Limiting the Tax Exclusion for Employer-Sponsored Insurance Can Help Pay for Health Reform
High-Income Surcharge Can Help Pay for Health Reform
C'mon, CBPP. Whether a proposal will raise revenue that "could help pay for health care reform" says nothing about whether it's good policy or not. Otherwise, CBPP would just support anything that increased revenue, no matter how terrible an idea. As I note in the title, if we grabbed every CBPP employee by the ankles and shook them, the cash that falls to the ground "could help pay for health care reform." But it'd be bad policy.
Similarly, today CBPP's Michael Mazerov denounced Amazon.com's efforts to challenge a New York tax as unconstitutional, on the grounds that Amazon.com's refusal to knuckle under and comply "hurts state and local governments' ability to finance education, health care, and other services." Well, if the states passed an unconstitutional law confiscating CBPP's property without just compensation, I'm sure they would rightly protest. Even though such a protest "hurts state and local governments' ability to finance education, health care, and other services."
There are news reports suggesting that Senate Majority Leader Harry Reid's main financing mechanism for his health care proposal will be an increase in Medicare taxes. The news reports vary on what the tax hike would look like, but some news reports suggest that the proposal could change the existing Medicare system in two ways: (1) it would no longer be an "individual-level" tax and instead marital status would determine tax liability, and (2) it would tax income sources beyond wages.
The problem with this type of proposal is that we already have such a tax system. It's called the federal individual income tax. The federal income tax taxes more than just wages, and it takes into account the marital status of the taxpayer.
Reforming the Medicare tax to include more than wages and to take into account marital status is an unnecessary complication, even if you favor a tax increase on high-income people. Just do it as part of the individual income tax.
Most conservatives vehemently oppose public funding of abortion directly via government outlays and ardently support the Hyde Amendment which restricted such government spending. This issue has come to the fore because several dozen Democratic Members of the House of Representatives have joined Rep. Bart Stupak in trying to strip abortion funding from health care reform.
But aren't these legislators ignoring huge federal subsidies for abortion through the tax code?
Currently, the tax exclusion for employer-provided health insurance is an implicit subsidy for private health insurance plans, many of which cover abortion procedures. Similarly, the itemized deduction for medical and dental expenses allows the cost of abortion procedures to be deducted. In other words, the current tax system is indirectly subsidizing abortion procedures, which causes higher tax rates on other income or reduced government spending. (Either way, the tax policy is not "abortion-neutral.")
Conservatives often support any type of tax cut as a rule of thumb, but suppose some liberal member of Congress proposed a separate itemized deduction for abortion expenditures - there would be some social conservative outrage. But in fact, we already have such a deduction, and although it's currently limited (must exceed 7.5% of AGI), some conservatives favor getting rid of this limitation (like Congressman Ron Paul's proposal) because they see it as a tax cut.
I know many conservatives would quibble with this, arguing that a tax cut is technically different than an outlay (i.e. the legal classification by CBO). But last year during the presidential campaign, John McCain proposed overhauling the exclusion of employer-provided health insurance into a refundable tax credit, a large fraction of which would have legally been classified as an outlay (i.e. government spending). In other words, Sen. McCain proposed government spending for people to buy private health insurance plans, some of which presumably covered abortion procedures. He just called it a tax cut.
So my question is: If the Hyde/Stupak Amendment, which says that government should not be directly financing abortions or insurance plans that cover abortion, is good public policy, what about indirect subsidies via the tax system that also lower the costs of abortion at the expense of others?
The respected Pew Center on the States released a report "Beyond California" this week assessing the state budget situation in the U.S., and suggesting that ten states are in serious fiscal trouble: California as well as Arizona, Florida, Illinois, Michigan, Nevada, New Jersey, Oregon, Rhode Island, and Wisconsin.
The Pew authors evaluated the states on six "indicators" they find in California: (1) high foreclosure rates, (2) increasing unemployment, (3) loss of state revenues, (4) relative size of budget gaps, (5) "legal obstacles to balanced budgets," and (6) poor money-management practices.
I have two primary critiques of that, although I first must say that it is exhaustively researched and contains much useful information. Pew's list of states in budget trouble is pretty much on the money, and they did a good job using information from many different sources (including us).
First, however, the Pew study focuses on effects, not causes. Since Pew is essentially trying to predict where the next California will be, not looking at causation means the report is limited in how persuasive it can be about solutions and predictions. Falling state revenues didn't cause California's budget crisis; it is an effect of (or even the same thing as) the budget crisis.
A big cause of California's budget crisis was spending commitments derived from overreliance on volatile revenue sources, particularly taxes on high-income earners, corporate profits, and capital gains revenue. These revenue sources soared during the boom, and legislators made spending commitments as if that soaring would never end. It did, and that's where the budget hole came from, in many states. Pew doesn't mentions volatility at all, except to criticize Oregon for not having a sales tax and Arizona for relying too much on one.
Second, a key argument of the report seems to be to criticize budget supermajority requirements but it falls quite short. It is a truism that supermajority requirements make it harder to raise taxes; Pew's "obstacle" is my "taxpayer protection." Any legislative process other than allowing a strongman to decree a tax increase has "obstacles," and I could expand at length why supermajority requirements help weed out unwise or problematic legislation. The governors of Rhode Island and Hawaii have vetoed tax increases this year so I imagine the veto is a "legal obstacle to balanced budgets." There is no discussion of "obstacles" to spending cuts, such as entrenched public employee union rules or strings attached to federal stimulus aid.
Pew claims that the supermajority is "a factor in recurring budget troubles" in California. But California isn't a low tax state; quite the contrary. The problem isn't that taxes are too low in California. It's that spending growth outstripped revenue growth. 17 states have a supermajority requirement and their budget situations vary dramatically. Supermajority requirements are a red herring.
(On a side note, the report cites a Nevada Supreme Court ruling suspending the supermajority requirement. They do not note that the court unanimously reversed that decision three years ago after intense criticism. I don't often use the phrase "judicial activism" but that a court was willing to suspend a constitutional provision comes close.)
The Pew report offers much valuable analysis, including much needed discussion of out-of-control state government pension obligations. Both experts and novices can get a good picture of the state budget situation from the study. But the focus on the "six indicators" and the policy implications that come out of it leave much to be desired.
I'm not sure if it's an industry press release or a news article, but Ucilia Wang of Greentech Media writes about the solar industry's efforts to get targeted tax credits and subsidies:
The Solar Manufacturing Jobs Creation Act, introduced by Sens. Debbie Stabenow, D-Mich. and Robert Menendez, D-N.J., would give manufacturers access to a cash grant program created by the stimulus package this year to help finance solar power installations.
Makers of components such as silicon wafers, solar cells and evacuated tubes for solar water heaters already are eligible to receive a 30 percent manufacturing tax credit for building new factories or expanding existing ones.
In March, I had the good fortune to see 20 impressive windmills just off the Danish coast. Looking out over the water at such a sight, it is easy to understand the attractiveness of wind power. It's renewable, no-carbon, and no-pollution, and is probably the best use of a wind-swept expanse of water that is still close to a large city. Also, Reason magazine recently compared the costs of different energy sources and found that the cost of windpower (9.3 cents per kilowatt-hour) is not too far off from the national average of (9.6 cents).
So why subsidize it?
Economists use the term "rent-seeking" whenever makers and sellers of a product ask politicians to pass laws that give them an advantage over their competition. Most of us call it corporate welfare. It is damaging to the overall economy because it changes incentives. Instead of creating the best products for the lowest cost, companies curry favor to get the best deal from federal, state and local officials.
For its own reasons, the wind industry has taken any number of government handouts, including tax credits, funds filtered through other government agencies, and state mandates designed to tilt the market in their favor. That's a shame, because there's ample evidence that wind is doing okay without corporate welfare being needed. If the wind industry's growth is dependent on continued subsidies, that's another way of saying that further investment is uneconomical.
There are few sectors of our economy with more profit potential than energy innovation. No one today can know what great energy innovations will be made over the next few decades, and no one today can know what investments will be duds and which ones will pay off tremendously. The ones who get it right will probably see an enormous payoff. Energy innovators should take the risks of their investments just as they take the profits, without relying on corporate welfare.
Sen. Harry Reid is in the process of putting forth his health care reform proposal. There have been numerous proposals put forth by various members of Congress. Any guesses on the title of Sen. Reid's bill? Here's what we've had thus far (of the major proposals):
Affordable Health Care for America Act American's Healthy Future Act Affordable Health Choices Act America's Affordable Health Choices Act of 2009 Common Sense Health Care Reform and Affordability Act (GOP substitute for House bill)
I'm betting the Reid bill will be called the "America's Health Care Affordable Choice Patriotic Freedom for Americans Only and Not Illegal Immigrants Future Act of 2009"
Beginning in April, car and tractor-trailer owners alike will have to shell out $25 for spruced-up license plates, by dictate of state leaders coming up with new ways to wring out revenue as an unprecedented budget shortfall looms.[...]
The new $25 license plate fee, which will be phased in as drivers begin renewing their two-year vehicle registrations in April, is up from $5.50 in 2001, the last time the state went through a full plate replacement program. Other states, like California, have never charged a fee for mandatory plates.
Drivers who wish to keep the same combination of letters and numbers must pay an additional $20 (holders of vanity plates, who already pay an annual cost, are exempted).
There's some talk about safety (reflective coating or something) but even the New York DMV admits that a driving purpose for the program is to "generate $129 million in General Fund revenue over two years, which will help address the State's financial crisis." (I'm of the opinion that most car inspection taxes and fees are about revenue, not safety.)
To the extent that the money goes to the general fund and not to pay for the cost of the plate, the money is a tax not a fee.
New Yorkers are required to get the new plates. And they cost $25. Want to keep your same license plate number so you don't have to call and fuss with your insurance company? Or let's say you want to hang onto an existing vanity plate? That's going to cost you an extra $20. So if you have three vehicles and are happy with your numbers, these new plates will set you back $135.
A website petition has been launched protesting the move at www.nonewplates.com. Interestingly, the driving force behind the petition is president of the New York State Association of County Clerks, who would have to administer all the fees and new plates.
Three weeks ago, House Speaker Nancy Pelosi put forth her health care reform proposal that was eventually passed (with one amendment pertaining to abortion) by the House. Speaker Pelosi's big financing for the additional spending in the bill came from a proposed 5.4 percent surtax on tax returns over $1 million ($500,000 for singles).
Now Senate Majority Leader Harry Reid is eyeing his health care reform proposal, and the AP is reporting that Reid is looking at raising Medicare taxes on those earning more than $250,000.
Currently, earnings are taxed at a flat rate of 1.45% on employer and 1.45% on employee (2.9% total) for Medicare, and unlike Social Security taxes, there is no ceiling.
A decision by Pfizer not to develop some land it owns in New London, Connecticut, would not normally make news. But because of the controversial way in which the firm came to own that land, which required a Supreme Court case to resolve, that plot of land is back in the news.
We're reminded that people are good at the things they enjoy. Justice Souter hated tax cases, and he decided them poorly.
In one of his most controversial cases, Souter cast his vote with the majority in a 5-4 decision to allow a local government to seize unblighted land from private owners and give it to private developers.
The Court accepted the argument of the City of New London, Connecticut, that transferring the property from the current homeowners to private developers would increase the number of jobs in New London and increase the tax revenues available to the city. This, in the Court's mind, was enough to satisfy the "Public Use" requirement of the Takings Clause.
Local governments have traditionally used their power of eminent domain to seize private property if it were blighted or if the city needed it for a public use such as a road. Giving land to another private party, in this case a corporation, seemed unjust and a misuse of the term "public use," so Susan Kelo sued the city for seizing her home, but in vain.
Well, how much tax revenue is it generating now? Zero. The developers have changed their minds and have no plan to develop the land, as Business Insider explains, alongside a picture of the vacant lot where only feral cats now live.
The Wall Street Journal has an I-told-you-so piece with some excellent comments by readers, particularly one from a local named Martin Heilweil who says the property may end up with a nonprofit hospital on it, ironic because that, too, would produce no property tax revenue.
Souter was replaced by Sotomayor who would have decided it the same way, as Reason explains.
Publicity of such fiascoes is beneficial. In the Kelo case, local New London officials were so revenue-hungry and confident that Pfizer would prosper that they threw people out of their homes and gave the land to Pfizer. In the Dell case, North Carolina officials were so confident that Dell would thrive there, they gave outlandish tax incentives worth millions, possibly up to $318 million, to the firm to build a facility. Five years later Dell has abondoned it. These so-called economic development officials are trying to outguess the market, but they can't and shouldn't be permitted to risk taxpayers' money that way. This LocalTechWire article includes some surprisingly candid reactions from North Carolina officials who acknowledge that they were gambling with taxpayer money.
P.S. Alicia reminds me that a group tried to teach Souter a lesson by persuading his New Hampshire town to seize his home to build the Lost Liberty Hotel and Just Desserts Cafe, generating more property tax for the town than Souter's residence generates. The FoxNews story googles up first.
As cash-strapped cities are seeking revenue, targeting the service fees charged by these companies seems like a good idea. As my colleague Joe Henchman explains in an Orange County Register op-ed:
Let's say I search a Web site and book a $100 hotel room. The online company charges me $10 for their service. Anaheim argues that hotel occupancy tax should be paid not only on the $100 room charge, but also on the $10 service fee.
And even though judges have not found the cities' arguments convincing (lawsuits have been dismissed in nine states and remain pending in the others), cities are suing and even sidestepping courts to subject as many parties as possible to hotel taxes. Joe writes:
Cities' own laws often state that hotel taxes are paid by hotel occupants, based on the amount the hotel receives. Amounts paid by guests to others aren't subject to the hotel tax. (Companies must, however, pay income taxes on this amount.) Earlier this year, the 4th U.S. Circuit Court of Appeals held that hotel taxes are owed only by retailers that operate retail facilities, and that online travel companies don't count.
Unfortunately, some cities are moving to amend their laws to apply hotel taxes to everyone conceivably connected with hotel transactions. Travel agents, brokers, and advertisers might be in danger, depending on how broad the laws get. ...
Hotel taxes are attractive to local politicians because they are a way to shift the tax burden to "outsiders." But because every U.S. city has a hotel tax, we're all somebody else's "outsider." The net result is that everyone is taxing everyone else in an unaccountable way, and unless the cities and their lawyers are stopped, in an unpredictable way, too.
The New York Superior Court recently heard oral arguments in the state's so-called "Amazon tax" case about a law requiring out-of-state online retailers to collect sales taxes on purchases if the company generates a certain amount of revenue from in-state sales.
In this week's Tax Policy Podcast, Jeffrey Reed, an associate with the law firm McDermott Will & Emery, which filed a friend-of-the-court brief on behalf of the Tax Foundation in this case, discusses the recent oral arguments, what to expect next and the legal and policy implications of the outcome of this case -- which will significantly affect "how the Internet is taxed, period."
Here are a two good blog posts from the Tax Policy Center's TaxVox blog.
First, a proposal by Bob Williams for a few great income tax credits to help turn around the stock market, prop up the book market, and inflate holiday spending to a healthy level. While I appreciate his humor regarding tax credits, the shot at voters electing Republican governors in Virginia and New Jersey seems strange. There is a big difference between cutting taxes broadly and enacting targeted tax credits meant to stimulate the economy. One has broad economic benefits, the other benefits special interests.
Despite once-high expectations, it is likely to be a waste of everyone's time.[...]
[T]he reform panel [...] is going to produce...a mouse. From its earliest days, the group was forced to work under impossible constraints. Chief among them: Obama's insistence that no one earning less than $250,000 should pay higher taxes. Exempting more than 95 percent of families and individuals from tax hikes of any kind essentially shut the door on any serious discussion of reform, which inevitably creates winners and, yes, losers.[...]
Obama is surrounded by economic advisors who understand better than I that reforming the way government collects revenue is both necessary and inevitable. Apparently, their views have been drowned out by his political advisers who, I assume, see the whole issue as a swamp.
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The D.C. city government has 
From Michael Grynbaum of 