by Scot Mussi | Jun 15, 2011 | News and Updates, Uncategorized
The lingering feud between Sen. Tom Coburn (R-OK) and Grover Norquist, head of Americans for Tax Reform, was punctuated last night when Coburn’s amendment to end ethanol subsidies failed to garner the necessary 60 votes in the Senate. Coburn says he won because 34 of 44 Republicans voted to end the subsidies. Norquist says he won because his amendment didn’t pass. Technically, Norquist is right, since for now the policy isn’t changing and ethanol producers can continue receiving $5 billion a year in government subsidies. But Coburn is right on the policy and the fact that 77% of his GOP colleagues voted to end the ethanol subsidies is a good sign for policy (and politically) minded Republicans.
It’s not that Norquist is a fan of ethanol, but he’s been insistent that if tax credits for ethanol are repealed, there must be a corresponding tax cut somewhere else, preferably across-the-board. Otherwise, he says, it’s simply a tax increase on ethanol producers, plain and simple, and tax hikes, no matter how they are defined, are bad public policy. Since Coburn’s amendment didn’t take the money that would have been raised by ending the ethanol subsidies and redirect it to across-the-board tax cuts, Norquist opposed the plan. Coburn simply wanted to use the ethanol subsidies to pay down the deficit.
Norquist’s opposition is unfortunate both in policy and politics. On the policy level, there should be very few, if any, tax expenditures (credits, subsidies) in the tax code. If government wants to subsidize something, it should do so through a line item in a spending bill. Had this been the case, then Coburn’s amendment simply would have been to strip funding for ethanol producers and Norquist would have happily agreed.
At a political level, there are few better places to begin demonstrating to voters the GOP’s commitment to cutting the budget than ending tax subsidies for ethanol. Unless you live in Iowa, Coburn’s amendment is probably supported by 70% of the electorate.
Norquist did support an amendment authored by Sen. Jim DeMint (R-SC) that would have ended the ethanol subsidy and the death tax (thereby making the complete package a net revenue reduction). That amendment didn’t go anywhere. And DeMint, often referred to as the Senate’s tea party leader, voted for the Coburn amendment anyway.
by Scot Mussi | Jun 11, 2011 | News and Updates, Uncategorized
I don’t mind spirited debates over whether varying kinds of tax cuts have an effect on economic growth, job growth, or any other kind of growth. It is a factual statement that high taxes impede growth while low taxes do not (would you work if the tax rate was 100 percent?).
State Republican lawmakers are reluctant to increase the length of time the unemployed are eligible for benefits. Democrats and Gov. Brewer want to increase unemployment insurance from 79 weeks to 99 weeks. Some Republicans, therefore, have decided that in order to garner their vote in favor of 20 more weeks of unemployment insurance, there must be some kind of corresponding tax reduction. Tax cuts (the right kind – not these), Republicans argue, will help the overall economy.
In today’s Arizona Republic story on unemployment insurance, however, the article closed with:
Democrats questioned how another tax break would translate into an immediate job for many of the long-term unemployed.
But nearly two years of unemployment insurance does? I’m still waiting for one Democrat to go on the record saying that 20 more weeks of unemployment insurance reduces Arizona’s unemployment rate.
by Scot Mussi | Jun 9, 2011 | News and Updates, Uncategorized
Democrats in Arizona only hold nine seats of thirty in the Senate and 20 of 60 in the House. But if recent reports are to be believed, the GOP-dominated legislature is about to pass a package perhaps unanimously supported by the left.
A special session of the legislature is called for tomorrow (Friday); the crux of the call is to add an additional 20 weeks of unemployment insurance benefits for those who have been out of work. Current benefits run 79 weeks. Brewer and the Democrats have been clamoring to make it 99 weeks. (Two years is 108 weeks.) The pitch to recalcitrant Republicans, like Maj. Whip Steve Pierce, is that it won’t cost the state a dime. But it will cost the federal government many dimes and since Arizona taxpayers are also shouldering the burden of the national debt – currently about $130,000 per taxpayer – it doesn’t make sense to most Republicans (and Independents I’m betting) to spend another dime moving benefits from a year-and-a-half to almost two years.
I’m sympathetic with those who have worked tirelessly in search of a job. The economic toll on many families has been harsh. But if they are really unable to find a job after 79 weeks, what makes 99 the magic number? It’s like the minimum wage argument. At what point is it “too much”?
But more troubling are reports that House leaders want to broker a deal with the governor: 20 additional weeks of unemployment insurance for SB1041 (the bill that subsidizes new businesses at the expense of current businesses). During the regular session, the House and Senate regrettably passed this measure overwhelmingly. The Democrats voted unanimously for these subsidies (evil corporate subsidies?) and only a handful of conservatives opposed them. Thankfully, Gov. Brewer vetoed the bill and said it was unfair, with “the potential to favor new businesses over those who’ve weathered the economic storms with us.”
That’s exactly right. You don’t revive the Arizona economy by increasing taxes on those entities who have weathered the economic storm with you only to provide those extra taxes to the new kids on the block.
The legislature took the first responsible step for getting Arizona’s economy back on track. It produced a sensible budget that relied less on borrowing and gimmicks than years past. This will help long term because as Arizona creeps out of this recession, our state expenses will be more in line with revenues. The legislature also deserves credit for reducing taxes that really are an obstacle to growth: corporate income and commercial property. Granted, these reductions will not happen overnight, but overnight fixes do not exist. If they did, we’d certainly know about them and we (and other states) would have implemented them by now.
Recoveries hurt. They take time to recover from. There are no quick fixes. The last thing state lawmakers should do, however, is enact the Democrat agenda.
by Scot Mussi | Jun 1, 2011 | News and Updates, Uncategorized
State Sen. Kyrsten Sinema (D-Phoenix) wrote in the Arizona Republic that despite voters approving a sales tax increase to fund schools, Republicans cut school funding while “handing out tax cuts for corporations and special interests.” Sinema’s angst over the budget cuts is consistent with her longstanding position on more spending for education. But framing the budget cuts against “tax cuts for corporations and special interests” is a bit of a laugher, since she also voted for special interest tax breaks.
When a bill to subsidize film production (SB1159) made its way to Sinema’s desk, she voted yes. This was a bill that doled out *refundable* tax subsidies to only certain qualifying producers. Arizona taxpayers would have had to pay these targeted subsidies for 30 years. Thankfully, the House killed this bill.
Late in the session, a bill (SB1041) heavily lobbied by business organizations that would have dramatically reduced property taxes for some companies at the expense of others passed overwhelmingly, including with Sinema’s vote. Gov. Brewer rightly vetoed this boondoggle.
I’m well-aware that when Sinema rips the Republican-only tax cuts, she’s referring to the corporate income tax rate cut that begins in 2013. In other words, she opposes the bill that applies to all corporations, but readily votes for the ones that are targeted, which quite clearly defines the term “special interest.” I can only assume that the main reason for her differing views is the price tag. Tax cuts for all are more expensive than tax cuts for some.
Without getting into the efficacy of across-the-board vs. targeted tax cuts, for Sinema’s purposes, it should make no difference. After all, Sinema is critical of the fact that tax cuts occurred at all while education budgets were cut.
So, why would Sinema vote for tax subsidies for film producers and other big businesses? As she puts it, “So, when you voted to raise your own sales tax, is this what you were expecting?”
by Scot Mussi | May 31, 2011 | News and Updates, Uncategorized
The Arizona legislature passed a bill this year that would continue to reduce commercial property taxes, begin a gradual phase down of corporate income taxes (from nearly 7 percent down to 4.9 percent), and subsidize new hires for some companies.
The corporate income tax cut doesn’t take effect until 2013 and it won’t be fully phased in until 2016 and the property tax reductions take four years to be phased in.
We supported parts of the package (property tax reduction and corporate income tax cut) and opposed other parts (the subsidies). On balance, the package was okay–not great, but better than kick to the head.
The bill was certainly not “once-in-a-generation” (AZ Chamber), nor was it “the best bill that’s ever been passed in Arizona for the economy” (Greater Phoenix Economic Council).
It wasn’t even the best tax package in the last five years. In 2006, Republicans passed (and Democrat Gov. Napolitano signed) the largest tax cut in Arizona history. The 2006 package included an across-the-board reduction in personal income taxes (how the vast majority of businesses are taxed) and an across-the-board reduction in state property taxes (commercial and residential alike).
In Arizona, less than 1 percent of C corp taxpayers (those who pay the corporate income tax) account for about 65 percent of the total corporate income taxes collected. In other words, very few companies pay the corporate income tax and the tax collects little revenue relative to total tax collections (it’s high water mark was about 10 percent of total revenue collected by sales and personal income taxes).
Now, part of the reason there aren’t many companies organized as C corporations in Arizona is very well due to the fact that Arizona has a high marginal corporate tax rate (3rd-highest in the western U.S.). Another reason is that the corporate tax rate in Arizona is 35 percent higher than the individual rate. Since businesses aren’t required to organize as C corporations, the vast majority of them do not (NFIB estimates that between 75% and 80% of businesses organize under the personal income tax system). The tax code should be neutral as to what kind of business you’re in and, accordingly, the rates should be the same. This is why we’ve long supported a corporate tax cut.
Is the package good? Yes. Is it the best ever? Not even close.
by Scot Mussi | May 14, 2011 | News and Updates, Uncategorized
The tax code punishes, encourages, rewards, and generally manipulates decisions we make, both big and small. And the tax code is crafted by politicians who are primarily motivated by ego and arrogance. They know what’s best, so just follow along and maybe a tax break is headed your way.
But what makes the current tax code a joke and the flat tax something to pine for, are the countless examples of policies that inherently conflict with one another.
“Congress is clearly biased against smaller cars,” says Joe Kristan, a CPA with Roth & Co. in Des Moines in today’s Wall Street Journal.
What? I thought Congress wanted everyone to own a Toyota Prius or Chevy Volt.
Guess not. The article points out that “this year Congress is running a large ‘bonus depreciation’ special on cars weighing more than 6,000 pounds, such as the Cadillac Escalade and Nissan Armada.
That ought to go over well at the Sierra Club.
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