by admin | Jan 30, 2019 | Free Market, News and Updates
The individual health insurance market has been a roller coaster for consumers since the passage of the Affordable Care Act.
Last year, the average ACA plan rose 34 percent – pricing out many of the individuals who do not qualify for federal subsidies. Additionally, many counties across the country have lost insurers, with only one option or even no options for consumers. Younger, healthier Americans have been forced into high-risk pools to subsidize the high-costs associated with pre-existing conditions and other benefits they are likely not to need. As a result, many have opted out of full coverage at all and risk incurring the Obamacare tax penalty for not carrying insurance.
After a failure of the Senate to repeal these disastrous policies, the Trump Administration has had few options for fixing our health insurance system. However, a year ago, some progress was made on this front.
With the passage of the Tax Cuts and Jobs Act in December 2017, Congress included the repeal of the tax penalty for individuals without medical coverage for policies beginning in 2019. Then in February of 2018, Trump issued an executive order allowing for the appropriate federal agencies to amend their rules regarding short-term duration health insurance.
Short-term duration insurance is not meant to qualify as full medical coverage, but instead is another insurance product available to help individuals through different periods of transition. Trump’s executive order overturned the Obama Administration’s directive to limit these plans to only 90 days. Instead they are now allowed to be issued for less than a year and may be renewed for up to three years.
These short-term plans will likely cost Americans half what the traditional ACA plan costs and the administration predicts around 600,000 people will choose these plans this year. Of the over half a million people, no more than a third are likely to leave their ACA plan; with most enrollees coming from individuals without any insurance at all.
Opponents argue the reversal of this rule will poach enrollees in the individual market. Obama’s rollback of short-term duration policies was meant to increase enrollment in the exchange. But it didn’t work. Instead, enrollment in the ACA plans decreased by 10 percent following the year of the rule change; which may have had something to do with premiums increasing by 21 percent that year.
There is a want and a need for more affordable policies that do not have all the bells and whistles of a traditional plan. Under the Obama 3-month cap of short-term policies, enrollees would have to reapply every 90 days, forcing a reset of their deductibles or sometimes a cancellation of their policy altogether. Given the short time frame, many customers would not be able to access full coverage insurance for months, until another enrollment period opened.
This rule change is good for consumers. It will dramatically expand choice and opportunity for coverage to hundreds of thousands of Americans.
Now it is up to the states to ensure these options will be available to their constituents by amending their laws to allow for greater regulatory flexibility of short-term duration plans. In Arizona, Representative Nancy Barto is sponsoring legislation to do just that. We encourage lawmakers to support this common-sense bill and allow more Arizonans to access affordable coverage.
by admin | Jan 23, 2019 | News and Updates, Tax
For over a year, the Club has been urging policymakers to address the looming tax conformity crisis. After the passage of the Tax Cuts and Jobs Act in Congress in 2017, it was realized that Arizona taxpayers could pay as much as $300 million more in FY2020 as a result of how Arizona conforms with the Federal tax code. It was never intended that federal tax reform would result in higher state income taxes, and is why a conform and reform plan must be adopted to stop the tax increase.
Yet with tax season now upon us, the legislature and Governor Ducey have still not agreed on a plan. Instead, there have been overtures on identifying ways to justify keeping the windfall, including spending on new programs or sticking the money into the ‘rainy day’ fund. Make no mistake, any plan that does not include returning the money to taxpayers is a tax increase and should be rejected.
With time running out, crafting a conform and reform plan should be at the top of the legislative to-do list. Senator J.D. Mesnard (LD 17) has consistently shown leadership on the issue, and has introduced legislation that would conform Arizona with the federal tax code while forestalling the tax increase.
Under Mesnard’s SB 1143, each income tax bracket would be reduced by 0.11 percent for the 2018 tax year, a rate cut that would hold taxpayers harmless in the short term while not disrupting the filing process currently underway. This would also give lawmakers some additional time to consider a more robust conform and reform plan, similar to what has been adopted in states such as Idaho, Georgia or Utah. The Club believes that conformity provides a great opportunity to improve and simplify Arizona’s tax code, but if an agreement cannot be reached on a reform package, returning the money to taxpayers is still better than any plan to keep it.
Following the implementation of a new higher-than-expected VLT fee, trust is thin with Arizona taxpayers. The Legislature needs to rally around a conform and reform solution and not try to sneak another tax increase through the back door.
by admin | Dec 7, 2018 | News and Updates, Tax
Lawmakers can’t say they weren’t warned. Last year, when the Arizona legislature proposed giving their taxing authority away to the Director of the Arizona Department of Transportation (ADOT), we fought hard to stop what the Club considered one of the worst pieces of legislation in recent history.
Now those chickens have come home to roost.
At the beginning of the month, ADOT decreed they will be imposing a $32 license tax on every privately owned registered vehicle in the state of Arizona. The new fee is 50 percent higher than what was estimated when the tax increase was being debated last spring. The fee is supposedly set at the value necessary to fund Highway Patrol, which was previously paid for through the gas tax, VLT revenues and the state general fund.
Why is the fee much higher than originally thought? After the ADOT Director was granted unilateral authority to set the fee, the budget to fund Highway Patrol came in $37 Million higher than originally estimated. They also discovered that they were poor at counting cars and that the pool of taxable vehicles was smaller than originally thought. The result: an $185 Million-dollar tax increase.
Now many lawmakers who voted for the bill are outraged by the Director’s audacity to levy a tax that is higher than they believe it should be. What did they expect? This is what happens when you farm out core governmental functions to bureaucrats. They empowered the Director to enact the tax and now lawmakers are upset that he is doing exactly what they told him to do.
This likely won’t be the only sting taxpayers feel from the new car tax if it is not repealed. Nothing in the law precludes the ADOT director from raising this fee every year. There are no controls in place to stop bloated budgeting or gaming the numbers to generate revenue for other purposes. Nothing to stop this fee from being assessed arbitrarily, making it higher for certain types of vehicles i.e. imposing a “climate change” tax for gas guzzlers. And no protections exist for low-income individuals who are less able to afford the fee.
Policymakers thought that by handing off fee authority to the ADOT director that they could quietly raise taxes without having to take responsibility for the new fee. They were wrong.
Voters know a tax when they see one, and they won’t be very sympathetic to bureaucrat-blaming or assertions that this is a user fee. They will be further incensed by the sneaky maneuvers used to skirt the constitutional requirement of a 2/3 majority vote to enact a new tax.
Hopefully the same lawmakers that are having buyer’s remorse will do the right thing and repeal this absurd tax from the books.
by admin | Nov 29, 2018 | Misc, News and Updates
A group of Phoenix residents and business owners successfully submitted over 40,000 signatures to the city clerk yesterday to refer an initiative to the ballot to end the $1 Billion construction of future light rail projects. The committee held a press conference to mark the momentous achievement.
After the city of Phoenix railroaded citizens of South Phoenix by pushing plans of a light rail extension on Central Ave that would reduce the number of traffic lanes from four to two, a grassroots effort emerged to beat back the disastrous plan.
Since community opposition began to coalesce in April of this year, the group has successfully stormed city hall, held community forums that reached thousands of residents, and stalled the 2-lane project on Central.
Their latest efforts were bolstered by support from residents and business owners throughout the city who would also be negatively affected by the expansion of light rail near them.
Building a Better Phoenix (BBP) put the City, the Federal Transit Administration, and Valley Metro on notice to cease any further funding or construction of light rail projects until the citizens have a chance to vote on the initiative, which will likely be in May or August.
This is a true David and Goliath story as the citizens’ group will likely be outspent 10:1 by the light rail and construction lobby. But facts are on their side. Instead of spending 40 percent of the city’s transportation revenues on light rail which serves less than 1 percent of the population, BBP would divert the money to be used for infrastructure improvements, including roads and bus service, which alleviates congestion.
A lot will ride on the success of the upcoming campaign, especially for South Phoenix who will experience certain gentrification of their neighborhoods, increased crime and homelessness in their community, and inaccessibility of emergency services with the 2-lane configuration.
The City of Phoenix is in desperate need of infrastructure improvements. Their roads are riddled with potholes and many are falling into complete disrepair. Especially in South Phoenix, many bus stops lack proper shading, long stretches of road are without sidewalk, and residents complain of poor lighting. Light rail has long been a rat hole of the taxpayers’ finances while also being ineffective at increasing mobility or convenience to residents. If the BBP initiative passes, money will be able to be diverted to higher priority challenges and more directly serve the citizens and businesses of Phoenix.
We hope the taxpayers of Phoenix will take this golden opportunity to hold city hall accountable and pass this historic initiative.
by admin | Nov 21, 2018 | Misc, News and Updates
Recently the City of Phoenix did something shockingly out of character. They made a good financial decision.
Two weeks ago the city council voted 7-1 to end their membership with the Arizona League of Cities and Towns. The League is an organization that depends on taxpayer money to hire lobbyists to persuade Arizona lawmakers to pass or defeat bills often contrary to taxpayer interests. At $145,000 a year, the City of Phoenix represented the largest single membership of the League.
Several of the council members cited the ineffectiveness of the League as their reason for their exit. Although it is likely that the City will simply use the money to hire more internal or contract lobbyists, the vote was still monumental as Phoenix has been a member of the League for over 80 years.
The City of Phoenix’ decision will be a significant signal to other Arizona cities and towns and may spur other local councils to weigh their investment in the organization.
The practice of local municipalities enriching lobbyists to fight for more government authorities and against good reforms that benefit taxpayers is common place. Just three years ago, the Club did independent research into just how much cities were wasting on lobbying activity. But the costs aren’t just monetary. Every year, dozens of bills are introduced at the legislature that promise important protections for taxpayers in the way of property rights, economic liberty and free speech. And each year dozens of city lobbyists work to ensure their defeat.
Though the City of Phoenix’ decision to remove itself from a big organization that solely exists to fight for more government might not have been philosophic – it does represent a win for taxpayers. Hopefully more cities will take their lead; at least on this decision.
by admin | Nov 9, 2018 | News and Updates, Tax
Arizonans have won BIG since Congress passed the Tax Cuts and Jobs Act (TCJA) in December 2017.
At the end of April of this year, over $215 Million dollars has been returned to taxpayer and rate payer pockets. Raises, utility rate cuts, bonuses and expanded benefits have enriched families and small businesses, as well as supercharged the national economy.
The federal legislation didn’t just cut tax rates, but also made reforms to the tax code that greatly simplified and streamlined our tax system, saving average taxpayers time, money and heartburn. For example, the bill doubled the standard deduction, which will save most Americans the hassle of having to itemize their deductions.
Despite the tremendous benefits to residents in our state, the TCJA poses both a challenge and an opportunity for Arizona.
The Challenge
Arizona’s tax code is reliant on the federal tax system as our income tax forms begin with the Federally Adjusted Gross Income (FAGI) figure. Each year when the federal government makes tweaks to the federal tax code, the Arizona legislature runs a “tax conformity” bill to align our codes.
The TCJA was passed in December of 2017 and most of the changes went into effect in January 2018 – some even applied retroactively. These were not small technical changes; but constituted the largest tax overhaul of the last 30 years. Therefore, the usual tax conformity bill at the Arizona legislature was insufficient to retain coupling with the federal tax code.
Moreover, because the tax cuts put more money directly back into taxpayers’ hands, the average Arizonan’s FAGI also increased. What does that mean? If the Arizona legislature does nothing, the State of Arizona will see a significant revenue windfall, borne by Arizonans by way of an unintended tax increase.
In fact, the Joint Legislative Budget Committee and the Department of Revenue, which does the fiscal forecasting for the state’s budget, estimates a $173M increase and a $236M tax increase respectively, in FY 2019 alone. The number is expected to grow to over $300 million by FY 2020.
The State cannot afford to do nothing.
Aside from the unintended tax increase, if the Legislature and Governor fail to pass tax conformity and reform before the 2019 tax year begins, there will be complete tax chaos in the state.
According to DOR, the impacts of not conforming would include:
- For 2017, taxpayers would have to amend their returns to back out from federal retroactive changes, including depreciation deductions and taxpayers affected by natural disasters in 2016 and 2017
- Taxpayers filing for 2018 would not be able to rely on the amount determined in their federal return for the starting point in their state return. This would add the following complexities:
- DOR would need to create a new form that lists all the adjustments necessary to determine a taxpayer’s 2018 FAGI
- Taxpayers would need to complete schedules that include hundreds of adjustments simply to determine Arizona’s starting point
- Major Changes would need to be made to DOR’s tax system
- The complexities would grow each year with non-conformity
- Because the additions and subtractions would be non-specific, explaining the process to taxpayers will be extremely difficult
Without a doubt, no one except the CPAs will profit from such a scenario as this.
The Opportunity
Historic federal tax reform has opened a window for Arizona to rethink our tax structure and make changes, that like the federal changes, modernizes and surges our economy.
The state has an opportunity to not just avoid a tax increase, but to use it to address inequities in the tax code, ensure 90 percent of taxpayers do not have to itemize their deductions, and even consolidate tax brackets.
With a major election behind us, it is time for our lawmakers to get down to the actual work of the jobs for which they have been hired. That means calling a special legislative session prior to January and passing a conform and reform bill. If they wait and allow the chaos to ensue, they can be sure that voters won’t forget and won’t rehire them in the future.
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