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May 8, 2008
Those Who Do Not Learn from the Past
From the AP:
WASHINGTON (AP) — Senate Democrats on Wednesday called for a temporary special tax on oil companies’ profits and a rollback of $17 billion in oil industry tax breaks as part of an energy package. The Democrats are also seeking federal penalties on energy price gouging and a suspension of oil deliveries into the government’s emergency reserve.The proposals for windfall profits taxes show a willful disregard for history. We commend to you a 2006 Congressional Research Service report, "The Crude Oil Windfall Profit Tax of the 1980s: Implications for Current Energy Policy". Start with the executive summary, page 2.Senate Republicans strongly oppose any additional oil industry taxes, which are widely viewed as unlikely to be enacted and would almost certainly prompt a veto by President Bush.
The proposed 25 percent profits tax would apply just to oil company earnings above what would be considered “reasonable” and only if those profits are not reinvested in expanding refinery capacity or renewable energy sources, according to a summary of the proposals.
The NAM issued a news release yesterday on competing energy measures in the Senate.
UPDATE (11:30 a.m.): Senator Reid's statement and summary sheet on the Consumer First Energy Act.
Posted by Carter Wood at 10:32 AM | Click here to comment | Send to a Friend
May 6, 2008
Flotsam and Dross
- Is it the exchange rate? "Volkswagen of America will pay more than $14 million over five years to be D.C. United's primary sponsor and have its logo appear on the team's uniform, sources familiar with the negotiations said yesterday." D.C. United is the professional soccer team in town. VW sponsors Vfl Wolfsburg in Germany, which finished with 12 wins, 10 losses and 9 draws last season in the Bundesliga.
- Washington, D.C., lobbied hard to get its own commemorative quarter -- after the 50 states -- and the three final designs are now being voted on: Duke Ellington, Benjamin Banneker, and Frederick Douglas. We'd go with Banneker, a mathematician, astronomer and surveyor. Coins have the power to excite children's imaginations, so a Banneker design might encourage a future engineer or manufacturer. Then again, he WAS from Baltimore. (Our real preference: Henry Adams and the Willard.)
- And in the mother country, from Reuters: "LONDON, May 6 (Reuters) - Prime Minister Gordon Brown has lost the "confidence and trust" of British business in less than a year in office, according to the head of a leading manufacturers group. Brown also risks sparking an "exodus" of British companies to more favourable tax regimes like Ireland, said Martin Temple, chairman of the EEF manufacturers trade body."
- Broad shoulders or deep pockets? From The Heartland Institute: "Sales taxes in the Chicago area could climb $1 billion this year, making Chicago the most expensive city in the United States in which to shop and dine...The tax hikes have been imposed by the Regional Transportation Authority (RTA), which includes Cook County and five suburban counties, and by the Cook County Board. They come on top of other major tax hikes, including a record $86 million property tax hike and 40 percent real estate transfer tax hike in Chicago, and the imposition of the nation's first tax on bottled water, also in Chicago..."The government unions are controlling the whole process. Hire more people, increase pensions, raise salaries. That's all they want, and they get it," said Jerry Roper, president of the Chicagoland Chamber of Commerce.
Posted by Carter Wood at 8:24 AM | Click here to comment | Send to a Friend
May 4, 2008
Tax Repatriotism
Senator Hillary Clinton, a Democratic candidate for President, on ABC's "This Week with George Stephanopolous":
So here is what I would do. We've talked about this, we've never gotten it done -- certainly under the Republicans, they were not about to -- we need to change the tax code to take out any single benefit from your tax dollars that goes to any business that exports a job out of Indiana to any foreign country. It's outrageous. It's unpatriotic that is still going on. And you look at the tax code -- it makes sense. We are, you know, a free country. If people want to start jobs somewhere else, we're not going to stop them. But why should we help them? Why should we tell them, if you move those jobs and you make profits over there, you don't have to pay taxes on them, unless you bring the money back home? Well, hey, why would you ever bring the money back home?Unpatriotic?
The NAM's policy proposal on repatriation, highlighted in a January 18th news release:
Repatriation of Foreign Earnings: In general, U.S. companies pay a 35 percent “toll charge” when they bring foreign earnings back to the United States. A temporary “tax holiday” enacted in 2004, which gave companies the opportunity to reinvest foreign earnings in the United States at an effective 5.25 percent tax rate, brought back some $300 billion to the United States and generated some $17 billion in tax revenues. Reinstating this provision would provide additional funds for much needed investment and job creation.
Posted by Carter Wood at 7:44 PM | Click here to comment | Send to a Friend
May 1, 2008
Mixed Messages
Taking no position on a tax holiday, one still notes ....
Washington Post, May 1: "Clinton Gas-Tax Proposal Criticized"
Washington Post, April 30: "Kaine May Float Gas-Tax Increase to Offset Shortfall"
Posted by Carter Wood at 7:54 AM | Click here to comment | Send to a Friend
April 30, 2008
Is it the Carbonation? Is that Why You Hate Us?
Maine is the latest state to embark on a broad expansion of government paid by taxes targeted on a very narrow industry and retail segment, based on a bogus "but it just seems right" nexus: Soda pop = bad health. From the Tax Foundation:
Back when cigarette tax increases were justified by politicians on the grounds of paternalism (even though they really just wanted more money), critics argued that the same argument could be applied to other unhealthy activities and products like candy bars or soft drinks. But such criticisms were dismissed as being scare tactics and unrealistic. But now the nannies at groups like the totalitarian Center for the Science in the Public Interest are having their voices heard in the push towards even more state control over our lives (largely through tax policy), much like the American Cancer Society has done over the past two decades on cigarette taxes. Of course, all of this is in the name of public health. (You as an adult aren't smart enough to make up your own mind about what to drink.)And extra thanks to the Tax Foundation's Gerald Prante who makes the connection between more, arbitary taxation and the loss of individual freedom. Someone needs to make that connection. Maine's legislators sure aren't.Policymakers in Maine are the latest to succumb to this pressure of raising money by targeting specific products. This time it goes beyond the usual suspects of cigarettes and alcohol. If you drink soda, you're now going to pay as much as 22 cents more for a 2-liter bottle. Yes, 22 cents more on that 2-liter bottle of Coca-Cola, Pepsi, Dr. Pepper, or even generic Sam's Choice Cola (assuming Wal-Marts are allowed in Maine). This extra revenue is designed to help pay for health care for self-employed individuals and small business owners. Such a policy has basically no justification in sound public finance. Such a policy is likely even regressive given that the tax will disproportionately be borne by low-income Maine residents in order to finance a spending program that disproportionately benefits upper-income residents (those who own businesses and are self-employed).
(Hat tip: Jim Morrell.)
Posted by Carter Wood at 9:30 AM | 1 comment; click here to read it or submit your own! | Send to a Friend
April 24, 2008
Oh, Yeah, Canada!
From Mary Anastasia O'Grady, writing in the Wall Street Journal's daily political e-mail, "Political Diary":
Canadian Finance Minister Jim Flaherty was in New York yesterday to give a speech touting the economic achievements of the relatively new government of Prime Minister Stephen Harper. He stopped by the Journal offices to give a preview. Since coming to office two years ago, Mr. Flaherty told us, the Harper government has succeeded in steadily whacking down the corporate income tax to 18% from 22%, and is headed for 15% by 2012. Aiming for a total tax burden or no more than 25%, Ottawa has also been pushing the provinces to cut their own taxes on business profits. Ontario (Canada's Taxachusetts) has been a notable holdout and some in the Canadian press even accused Mr. Flaherty yesterday of leaving Ontario out of his sales pitch to U.S. investors. Mr. Flaherty joked in return that he was "gently prodding [Provincial] Premier [Dalton] McGuinty in my own subtle way to reduce business taxes."Canada's cuts come none too soon. Business tax-cutting has been a global phenomenon, with the OECD countries now averaging less than 27%, down from 38% in 1993 (the U.S. average is 40%). It's also of a piece with the Harper government's broader pro-growth agenda, which includes free trade deals with Colombia, Peru and South Korea and work to speed up transit of goods at the Windsor-Detroit border crossing.
Posted by Carter Wood at 3:54 PM | Click here to comment | Send to a Friend
April 20, 2008
On the Manufacturing Economy
NAM's chief economist, David Huether, was on CNBC Friday in a report on the manufacturing economy, reacting to an interview with Jim Owens, CEO of Caterpillar. Also in the segment, Brian Rayle of FTN Research. The 4-minute video is here. And more from David in the AP story:
Nearly half of the manufacturing industry's 73 subsectors were expanding through February, according to the National Association of Manufacturers. Manufacturing output rose 1.8 percent in 2007 and is forecast to climb to 1.5 percent in 2008 as continued export strength cushions the blow of slumping home and automobile sales, said David Huether, NAM's chief economist.Construction machinery makers like Terex Corp. are straining to keep up with foreign demand for equipment used on infrastructure development projects. Also thriving are food processors, oil refineries, electronics makers and others, Huether said.
Posted by Carter Wood at 5:24 PM | Click here to comment | Send to a Friend
April 18, 2008
Sounds Like a Winning Campaign Platform to Us
From Reuters, reporting on Silvio Berlucsconi's election to a third term last weekend as prime minister of Italy:
On Tuesday, he repeated campaign promises to cut taxes and sell state-owned real estate to trim a crushing public debt burden.Time again to turn to the Tax Foundation for the global context: "Currently, the average combined federal and state corporate tax rate in the U.S. is 39.3 percent, second among OECD countries to Japan's combined rate of 39.5 percent."He has also pledged more infrastructure spending to stimulate the economy...
Posted by Carter Wood at 3:28 PM | Click here to comment | Send to a Friend
Not Such a Winning Platform
From the Tax Foundation, last week, April 9.
Today Maryland Governor O'Malley signed into law the final piece of the state's major tax overhaul, an eighth tax rate and bracket on personal income."We see no record of any state having raised all three of its major tax rates in one fell swoop, but Maryland has done just that," said Bill Ahern, referring to the hikes in the sales tax, the corporate income tax, and the personal income tax that received its final change today. The study is Tax Foundation Fiscal Fact, No. 124, "Maryland Flouts Regional Tax Competition with Historic Tax Hike."
The study points out that middle-income people in Maryland were and still are paying higher income taxes than in any border state, and that in only five U.S. states—California, Hawaii, Iowa, Maine and Oregon—could a couple with $75,000 in taxable income be in a higher tax bracket than an average Maryland couple. The Maryland rate for middle-income workers is about 7.5 percent (4.75% state plus 2.73% local).
Posted by Carter Wood at 3:26 PM | Click here to comment | Send to a Friend
April 17, 2008
The Candidates and Capital Gains Taxes
Useful inquiry by Charlie Gibson yesterday in the ABC Democratic presidential debate, asking Sen. Obama and Sen. Clinton if they would increase the capital gains tax rate, noting that previous cuts in the rate had produced more revenue. (Relevant portion of the transcript here.) Senator Obama reaffirmed previous statements saying he could support an increase from the current 15 percent to 28 percent.
OBAMA: Well, Charlie, what I've said is that I would look at raising the capital gains tax for purposes of fairness.And for Sen. Clinton:We saw an article today which showed that the top 50 hedge fund managers made $29 billion last year -- $29 billion for 50 individuals. And part of what has happened is that those who are able to work the stock market and amass huge fortunes on capital gains are paying a lower tax rate than their secretaries. That's not fair.
GIBSON: I'm going to go to commercial break. But I just want to come back because of one thing you said. And I want to be clear, the question was about capital gains tax. Would you say, no, I'm not going to raise capital gains taxes?Neither addressed the basic point, that cutting the capital gains tax increases investment AND government revenues.CLINTON: I wouldn't raise it above the 20 percent, if I raised it at all. I would not raise it above what it was during the Clinton administration.
GIBSON: If I raised it at all. Would you propose an increase in the capital gains tax?
CLINTON: You know, Charlie, I'm going to have to look and see what the revenue situation is.
Elsewhere, Larry Kudlow interviewed Sen. John McCain on Tuesday. (Transcript.) Capital gains did not come up. Here's his campaign's statement on the issue:
Reward Saving, Investment and Risk-Taking: Low taxes on dividends and capital gains promote saving, channel investment dollars to innovative, high-value uses and not wasteful financial planning. John McCain will keep the current rates on dividends and capital gains and fight anti-growth efforts by Democrats.UPDATE (3:30 p.m. Friday): Wall Street Journal editorial, "Obama's Tax Evasion" recounts the debate exchange.
Posted by Carter Wood at 10:53 AM | Click here to comment | Send to a Friend
Senator Hatch at the NAM on R&D Today
The National Association of Manufacturers will host Sen. Orrin Hatch (R-UT) today at noon as the Senator makes the case for U.S. competitiveness and the innovation-based economy, emphasizing the need for action on the R&D tax credit. Hatch is a sponsor of the S. 2209, to strengthen and extend the tax credit for research and development investment.
The R&D tax credit expired again at the end of 2007 -- for the 13th time, it expired -- and companies are beginning to report the negative consequences in their first quarter earning statements. Meanwhile, countries like New Zealand are moving ahead with their own, even more generous investment incentives.
So there's a sense of urgency, or should be. Last week 85 members of House signed a letter urging leadership to move House R&D incentive legislation. (A copy of the letter is here.) For more, go to the R&D Credit Coalition's website.
And welcome, Senator Hatch.
Posted by Carter Wood at 8:47 AM | Click here to comment | Send to a Friend
April 15, 2008
For Jobs Creators, Some Good News on Taxes
The grasping reach of the Illinois state revenue collectors was slapped down by the U.S. Supreme Court today, a welcome decision on this, the taxiest of tax days.
WASHINGTON (AP) — Corporate taxpayers won a round in the Supreme Court on Tuesday in a case challenging the long arm of state tax collectors.The court's ruling is available here. The NAM's description of the case is here, and our amicus brief is on-line here.In a unanimous decision, the justices said Illinois courts must take another look at whether the state can tax Ohio-based Mead Corp., a paper and forest products company, in the $1.5 billion sale of data retrieval service Lexis/Nexis in 1994.
Writing for the court, Justice Samuel Alito said the state courts misinterpreted two previous Supreme Court rulings in deciding that Illinois was entitled to tax a fraction of the gain of Mead, now MeadWestvaco Corp.
The National Association of Manufacturers, Gannett Co. Inc. and the Walt Disney Co. all filed briefs supporting MeadWestvaco in the case.
Mead says its $1 billion gain from the sale can be taxed by Ohio, where the company is headquartered, but cannot be taxed by Illinois.
Posted by Carter Wood at 5:14 PM | Click here to comment | Send to a Friend
Tax Day: No George Harrison, Eric Idle Instead
A fine, multidecade trio of Tax Day songs, courtesy James Lileks.
Barbara Stanwyck says, "I loved every minute of it!"
Posted by Carter Wood at 8:10 AM | Click here to comment | Send to a Friend
April 14, 2008
Maryland, Using New Jersey as a Model
The Wall Street Journal observes that Maryland's just concluded legislative session undid the hated computer services tax, but instead of cutting government spending to compensate for the lost revenue, decided to disadvantage another group of small business owners, the purported "millionares," with an income tax surcharge on top of increases in top tax rates approved last year. From "New Jersey on the Chesapeake":
As state Senate Minority Whip Allan Kittleman pointed out, many of Maryland's so-called millionaires are actually small businesses that pay taxes through their proprietor's personal tax returns. With the state's economy struggling, wise money would avoid cudgeling a sector that has grown to more than 440,000 small businesses statewide. They now have another incentive to move to Delaware.
Posted by Carter Wood at 9:08 AM | Click here to comment | Send to a Friend
April 13, 2008
The War Against Carbon Dioxide Goes Too Far
From The San Jose Mercury-News:
SACRAMENTO - Joe Six-pack will have to pay a lot more to get his buzz on if Assemblyman Jim Beall has his way.Well, then, let's get all the attorneys general together and sue the beer industry. Force them to reach a settlement.The San Jose Democrat on Thursday proposed raising the beer tax by $1.80 per six-pack, or 30 cents per can or bottle. The current tax is 2 cents per can. That's an increase of about 1,500 percent.
Beall said the tax would generate $2 billion a year to fund health care services, crime prevention and programs to prevent underage drinking and addiction.
"The people who use alcohol should pay for part of the cost to society, just like we've accepted that concept with tobacco," Beall said.
NO, NO! Just kidding. That's just the reductio ad absurdum for the logic behind this tax-hungry attack on a single industry AND on the consumers and taxpayers who enjoy its product.
And, unfortunately, this punitive, jobs-killing mindset isn't so absurdum. From the Ellsworth-American in Maine comes a doctor's public policy prescription to fight obesity:
Because whole milk is a gateway drug?Tax unhealthy foods with funds going towards either environmental health improvements such as sidewalks or offsetting the higher price of fruits and vegetables. Could tax sugar sweetened items per gram. Ban sales of whole milk in stores. Legislate zoning in school areas to require businesses to have a minimum percent of sales be healthy foods.
The totalitarian impulse appears way too often among public-health advocates.
Posted by Carter Wood at 7:46 PM | Click here to comment | Send to a Friend
April 11, 2008
Vodcast: Secretary Gutierrez on Colombia, Taxes
Commerce Secretary Carlos Gutierrez spoke at the National Association of Manufacturers recently on taxes and employment, as well as the importance of expanding trade to keep the economy humming.
Beforehand, the Secretary stopped by the "America's Business with Mike Hambrick" studio to make the case for tax incentives and the U.S.-Colombia Free Trade Agreement, an interview we highlight in this week's video podcast.
"We should not put politics in front of sending a message to an ally," Secretary Gutierrez said of the Colombia trade deal. "If we don’t approve this, our allies and friends will be very confused. And people who don’t like us will be very happy."
For more on this week's program and to watch the video in a larger format, please visit www.AmericasBusiness.org
Posted by Carter Wood at 3:21 PM | Click here to comment | Send to a Friend
April 8, 2008
Maryland: But We Really Have to Tax Somebody!
The much-hated-in-anticipation Maryland tax on computer services is repealed. But to replace those revenues ...
The General Assembly repealed a new sales tax on computer services before it went into effect and replaced the unpopular $200 million levy with a combination of cuts and a three-year individual income tax surcharge on earnings of more than $1 million. Passed in the final hours of last year's special session, the so-called "tech tax" was opposed by a broad consortium of business groups that warned the measure would destroy Maryland's high-tech economy and cause a migration of well-paying employers out of state.Ah, that's the strategy. A mighty wave of unrest rose against the tech tax: It was a broadly based tax that also hit a large, vocal group of people with organizational and communication skills, so they mobilized an effective lobbying force. Upper-income taxpayers represent a smaller group and if they complain, you can beat them up for being selfish.
Except what's the consequence to the state? The Maryland Chamber, which opposed the tech tax, had a good primer on the alternative tax scheme:
The proposed new income tax bracket of 6.25% would make Maryland’s top rate the 4th highest in the country (combined state and local), behind only California’s 10.3%, Rhode Island’s 9.9%, and Vermont’s 9.5%. The new combined rate of 9.45% would be significantly noncompetitive with our neighboring states of Virginia (5.75%), West Virginia (6.5%), Delaware (5.95%), the District of Columbia (8.7%) and Pennsylvania (3.07% gross). We believe that this income tax increase would be counterproductive to Maryland’s economic development.Not a good campaign slogan: Making Maryland Less Competitive!
Posted by Carter Wood at 8:45 AM | 1 comment; click here to read it or submit your own! | Send to a Friend
Liberals Who Embrace Tax Incentives, Free Trade
The political left in New Zealand enacts tax incentives for R&D:
Increasing the level of private research and development will become that much easier because of a Labour-led government tax credit initiative which comes into effect on 1 April, Research, Science and Technology Minister Pete Hodgson said today.And, they welcome the expansion of trade through free-trade agreements:Pete Hodgson made his comments during a visit to Australo, a Dunedin nanotechnology company. Australo have developed ground-breaking nanopore technology that has a broad range of applications, including diagnosis of cancer, viruses and other diseases.
BEIJING: After China and New Zealand signed a free-trade agreement, the first one that Beijing has concluded with a developed economy, Prime Minister Helen Clark of New Zealand said Monday that it could also influence Australia and other countries that were negotiating similar accords with China.These actions were taken by a government led by the Labour Party, a left-liberal organization akin to the U.S. Democratic Party. Tax relief for business and expanded trade from governing liberals...It IS possible."I think there'll be a lot of interest in what New Zealand has achieved," Clark said after witnessing the signing of the accord with Prime Minister Wen Jiabao.
Under the agreement, New Zealand will phase out all tariffs on imports from China by 2016. In return, China will remove tariffs on 96 percent of its imports from New Zealand by 2019, according to details of the agreement released by the New Zealand government. The agreement also covers trade in services.
Posted by Carter Wood at 8:39 AM | Click here to comment | Send to a Friend
Tax Incentives: Helping Grow the Goetta
Daniel Glier of Glier Meats joined other business leaders Monday in a meeting with President Bush to discuss the role that tax incentives play in encouraging investment -- not just for big corporations, but for small- and medium-sized businesses.
Active in the National Association of Manufacturers, Gleier attested to benefits that accelerated depreciation offer his company, the nation's largest producer of goetta. The Cincinnati Enquirer explains:
Glier, of Covington, Ky., was among nine small and mid-size business owners summoned to the White House to discuss with Bush ways that they’re taking advantage of investment incentives in the recently enacted economic stimulus package.Goetta is the Cincinnati-area version of scrapple -- an ethnic German mixture of pork, beef, whole grain and eats, eaten for breakfast.Under the plan, businesses can double to $250,000 the amount of expenses they can immediately write off, something Glier said encouraged him to make equipment purchases this year above what he otherwise would have made.
“I had a couple of things in the pipeline and with this, it made sense to go ahead with them,” Glier said.
Glier’s first purchase was a $100,000 clipping machine, which will allow him to automate the placing of metal fasteners at the end of each sausage of goetta. Previously, employees would clip about 7,000 packages a day by hand.
With the incentives, however, Glier told Bush that he also was able to buy a $15,000 replacement replacement refrigerator compressor and install a deer processing facility, which will operate in the fall to process meat for hunters.
It appears to have been a positive, productive session between the business owners and the President, demonstrating that lowering taxes does work as intended. More work, more income, as the President noted.
Posted by Carter Wood at 8:17 AM | Click here to comment | Send to a Friend
April 3, 2008
Washington Post: Wrong on Relief
The Washington Post’s lead editorial today, “Wrong Relief,” is, to put it quite simply, wrong. The premise of the opinion piece—that allowing companies to “carry back” current losses to earlier, profitable years is an “unwarranted bailout” —ignores the whole point of the so-called extended net-operating-loss provision, or NOL. The rules help smooth out swings in income (and tax payments) resulting from business cycle fluctuations and unexpected financial losses and are a godsend to businesses in cyclical industries, like manufacturing.
Under current law, companies can carry back NOLs for a two-year period and the Senate bill would increase this period to four years. Allowing companies in a downturn to “carry back” current losses to earlier, profitable years—like this provision would do—frees up funds that can be used for investment and job creation.
This is exactly what we need to get our economy back in business—more investment and job creation. Extending the NOL period is one way we can do that. In fact, an extended net operating loss carryback provision enacted in 2002 provided much needed relief to a number of manufacturers. In one case, a National Association of Manufacturers' member company was able to reopen a plant within months after the change was enacted, in part because of the refund the company received because of the NOL provisions.
When policymakers were putting together the first stimulus package earlier this year, the NAM pushed for inclusion of an the extended NOL carryback period. We’re pleased the Senate has decided to include it in their latest effort.
Posted by Dorothy Coleman at 10:41 AM | Click here to comment | Send to a Friend
Maryland: But We Have to Tax Somebody!
From The Washington Post:
A Maryland Senate panel voted to impose a three-year surcharge on the income of millionaires yesterday as part of a broader plan to repeal the state's new tax on computer services.Still very doubtful the tax increase passes, but if so, a couple of points:The 10 to 5 vote sends the legislation, which has deeply divided Montgomery County lawmakers, to the full Senate. Senate President Thomas V. Mike Miller Jr. (D-Calvert) predicted that it will be passed in the waning days of the legislative session, which is scheduled to end Monday.
Granted, the Tech Council of Maryland is pleased. Give them credit for hard work.
Posted by Carter Wood at 8:47 AM | Click here to comment | Send to a Friend
March 28, 2008
Getting Overtaken on R&D Incentives
Eighty-seven days have passed since the U.S. research and development tax credit expired, nearly an entire fiscal quarter.
And in the meantime, other countries are expanding their incentives for R&D. From Britain comes the news...
The chancellor announced that large companies carrying out new technology R&D would receive higher tax incentives from HMRC. Tax credit enhancements rise to 175 percent for large companies from 150 percent, which means an organisation spending £100,000 on R&D will see a tax saving of £7,500.
Posted by Carter Wood at 1:38 PM | Click here to comment | Send to a Friend
Lieberman-Warner: Intended Consequences
We're always on guard against new laws and regulations creating unintended consequences that take a whack at manufacturers and the economy, but when Phil Kerpen of Americans for Prosperity considers the Lieberman-Warner cap-and-trade scheme, he sees a lot of intended consequences. Kerpen cites the NAM-ACCF commissioned study on S. 2191, America's Climate Security Act, which projects inflation-adjusted costs including 3 to 4 million fewer jobs, $4,022 to $6,752 in lost household income, an annual hit to GDP of between $631 billion and $669 billion, and higher energy prices — 60 percent to 144 percent higher for gasoline and 77 percent to 129 percent higher for electricity. From "Bad Times for Green Schemes":
But these costs are not unfortunate side effects of the bill; they are intended effects. The bill’s key regulatory scheme is called “cap and trade,” which is a complicated, indirect way of levying an energy tax. Instead of charging a set amount for carbon-dioxide emissions, the government would sell a fixed number of permits, with prices set at auction and then determined by trading on Wall Street. This has all the costs of a tax, with price uncertainty and administrative costs thrown in.Meanwhile, cap-and-trade has failed in Europe to achieve its goals, and even if successful, does anyone seriously believe such a program would do anything to curb supposed global warming?Al Gore acknowledged that the House-sponsored energy tax of 1993, which he championed as vice president, contributed to Democratic congressional defeats. Yet while the cap-and-trade scheme helps hide the tax from voters, its purpose remains the same: Make energy much more expensive so that people use less of it.
Better to encourage the prosperity that allows the developed world to afford to address the environment, Kerpen argues.
Posted by Carter Wood at 8:21 AM | Click here to comment | Send to a Friend
March 27, 2008
Tax Freedom Day, a Little Sooner, But Still Late
A new analysis out by the Tax Foundation, "Tax Freedom Day® to Arrive April 23 in 2008." Subhed: America Will Work Three Days Less to Pay Taxes in 2008 than in 2007; Stimulus Rebates Push Date of Celebration Up
The full study is here.
Posted by Carter Wood at 1:47 PM | Click here to comment | Send to a Friend
Pessimism, Unrestrained by Economic Reality
Since we're citing James Pethokoukis of US News today, we appreciated his response to this bit of unnecessary glumness.
This is the most downbeat thing I read today. From the Wall Street Journal:Right you are, James."We have to accept that this is no longer a nation of 4% real economic growth. This is a mature nation that no longer has a strong manufacturing base," says Steve Leuthold, chairman of Leuthold Weeden Research in Minneapolis.My take: The last time I heard this talk was back in the mid-'90s, right before the economy turned on the jets. Back then, the common wisdom was that the economy could grow no faster than 2.5 percent a year or so. Here is a bit from a 1996 New York Times story on the topic:
History and circumstance, in sum, have locked the United States into a level of economic growth that, measured against expectations raised by the 1996 Presidential campaign, is politically unacceptable. "It might be good for our politics if some candidates acknowledged this," said William Kristol, editor of the Weekly Standard and a Republican strategist, addressing an issue that most politicians don't, in public.I might buy into this theory today if it looked to me that the U.S. economy was already optimized for speed. But it clearly isn't, not with the second-highest corporate tax rate in the world, for instance, or a healthcare system that is a terrible burden on employers. Now is no time to give up on growth.
Suppose there's always a Club of Rome constituency out there, at least among the media and think tank crowds, but the record of economic pessimism is a notoriously bad one. And the record of politicians who embrace that pessmism is even worse.
Posted by Carter Wood at 12:12 PM | Click here to comment | Send to a Friend
The President's Visit to a Manufacturer
From President Bush's remarks yesterday at Colorcraft of Virginia, a commercial printing company in Sterling:
ColorCraft is a small, thriving business that will benefit from the stimulus package that the Congress passed earlier this year. It will benefit from it because if they make -- if Jim decides to purchase software or machinery, there is a tax incentive to encourage him to do so. He's made the decision to do so, and his company will be encouraged to do so through the tax code.Coverage from Leesburg Today and Associated Press with pictures. Jim Mayes, company president, is former chairman of the board Printing Industries of America/Graphic Arts Technical Foundation, the association points out.And that's important because when he buys the machine, or when he buys software, somebody has to manufacture that. Therefore, there is a direct link between the stimulus package and jobs. As well -- we talked about this earlier -- a lot of the folks who work here at ColorCraft are going to get a check in the second week of May, as part of the economic, pro-growth stimulus package.
Posted by Carter Wood at 8:40 AM | Click here to comment | Send to a Friend
March 25, 2008
Guess That Leaves Virginia
Amid the recent spate of New Jersey and Maryland news, we suggested the tax increases and other government follies could drive businesses to Delaware.
But Delaware, too, has its problems.
Thursday morning I read a report from the Tax Foundation in which Delaware now ranks as the most expensive state government in the contiguous 48 states. We spend 18 percent more per household than New Jersey, 47 percent more than Maryland, 52 percent more than Pennsylvania and 70 percent more than Virginia. If you care about this state like I do, that has to hit you dead in the heart. Our families and businesses are paying for gold-plated state government and we're simply not getting our money's worth. Not in our schools, not in our roads, not in job creation.That's Dave Burris, president of the Delaware Taxpayer Coalition, writing in Delaware Online.
Posted by Carter Wood at 2:34 PM | Click here to comment | Send to a Friend
March 21, 2008
Not to Pick on New Jersey, But ...
From NJBiz.com:
TRENTON—New Jersey’s $1 million national advertising campaign to attract businesses to the state appears to be generating interest, but has not snagged any companies.Perhaps the potential Garden Staters start reading the news coverage like this story and then have second thoughts...“Relocation is a very refined business and there are entities that work with nearly every major company,” says Gary Rose, chief of the state’s Office of Economic Growth. “In that world, we see our job is to get connected with intermediaries and make sure they are aware of our programs and offerings.”
New Jersey Senate Health Committee Chair Joseph Vitale (D) on Monday announced a universal health coverage proposal that would require all residents to obtain health coverage within three years, the New York Times reports. About 1.4 million state residents are uninsured (Chen, New York Times, 3/18). ...[snip]According to Vitale, the second phase of the plan would cost an estimated $1 billion and eventually would be funded with savings from a reduction in charity care, as well as premiums from beneficiaries and other sources.Oh, yeah. Other sources. The same other sources that will pay for this?
New Jersey is likely to soon join California and Washington in approving legislation requiring up to six weeks of leave to care for newborns, adopted children or sick family members. Workers receive a portion of their salary or wages, with coworkers providing the funds through new mandatory payroll deductions.
Posted by Carter Wood at 4:28 PM | Click here to comment | Send to a Friend
March 20, 2008
Robbing Peter to Rob Paul, Maryland
From The Baltimore Sun:
The House of Delegates yesterday gave preliminary approval to a slimmed-down version of Gov. Martin O'Malley's budget, voting down a Republican amendment to repeal the computer services tax through additional budget cuts.See, if you let the roads deteriorate, then all the computer service businesses will find it hard to move to Delaware.But multiple efforts to scrap the unpopular levy are still under way in Annapolis, with some support building around the idea to tap the $400 million Transportation Trust Fund to pay for a repeal of the $200 million expansion of the sales tax to computer services.
Posted by Carter Wood at 1:01 PM | Click here to comment | Send to a Friend
March 19, 2008
In Michigan, Support for R&D Tax Credit
A very good forum on the innovation (OK, the NAM helped sponsor the event) in Greenville, Mich., with U.S. Rep. Dave Camp talking about the R&D tax credit -- an issue he's passionate about. From The Daily News:
GREENVILLE - A large part of the region's economic future rests on United Solar Ovonic.Hence the focus on the tax credit, which expired AGAIN last year. Rep. Camp and Rep. Sander Levin (D-MI) have introduced a bill, H.R. 2138, to make the credit permanent.Meanwhile, the Auburn Hills-based company's future largely rests on its ability to conduct continual research and development of more advanced products.
Nancy Bacon, executive vice president of United Solar Ovonic's parent company, Energy Conversion Devices Inc. (ECD) in Rochester Hills, called research and development "the foundation of this company" Tuesday.
Good observation as well from Gordon Stauffer, founder, president and CEO of Northland Corp. in Greenville: "Lapsing this tax credit has been disruptive... Not knowing what to expect has been difficult to deal with. This is as important to Michigan as anywhere else."
Oh, and nice web presence from United Solar Ovanic.
Posted by Carter Wood at 3:05 PM | Click here to comment | Send to a Friend
States, Taxing Their Way to Recession
A new analysis by the Tax Foundation's president, Scott Hodge, reports that U.S. states are taxing "job providers" at a higher rate than most any country in the world.
From the news release:
Counting the federal rate alone, the U.S. has the world's highest corporate tax rate, but including average sub-national rates (federal plus state in the U.S.), Japan edges out the U.S. for the highest-tax location (see table).Take a look at the chart. It's actually alarming, from a competitive standpoint.This new study breaks the tax down state-by-state, adding each state's corporate tax rate to the federal corporate tax rate. The results show that 25 states impose, when combined with the federal rate, a higher business tax rate than in any other nation. In fact:
25 states have a combined corporate tax rate higher than top-ranked Japan.
35 states have a combined corporate tax rate higher than third-ranked Germany.
46 states have a combined corporate tax rate higher than fourth-ranked Canada.
All 50 states have a combined corporate tax rate higher than fifth-ranked France. "If federal lawmakers are serious about making the U.S. corporate tax system more competitive globally, they will have to partner with state officials to lower the nation's overall corporate tax burden," Hodge added. "Likewise, state officials should have a vested interest in cutting the federal corporate tax rate because there is only so much they can do to improve their own competitiveness. After all, even corporations in the three states that do not impose a major state-level corporate tax—Nevada, South Dakota, and Wyoming—still shoulder a higher corporate tax rate than France, and 25 other major countries, because of the 35 percent federal corporate rate."
For the full Fiscal Fact No. 119, please click here. It's excellent work.
Posted by Carter Wood at 9:26 AM | Click here to comment | Send to a Friend
March 18, 2008
Taxing Choice: Goodbye Maryland, Hello Delaware
From The News-Journal, Wilmington, "Md. sales tax could make Del. a refuge":
Lawmakers' efforts to impose a new sales tax on the computer services industry may have permanently tarnished Maryland's reputation among some small-business owners there, raising the possibility that they will simply pack up and relocate across the border.Supporters of repealing the tax rallied in Annapolis last week, proclaiming "axe the tax." The Tech Council of Maryland issued a news release decrying the effects of the computer services tax.The Legislature in November voted to implement a tax that the computer industry never had to deal with. Even as hopes rose last week that the 6 percent tax will be repealed, the issue already has prompted some computer businesses to explore Delaware's offerings, fed up at last with high property taxes and government intrusion.
"We're feeling more and more like the state wants to run everything," said Duffy Thomas, who with brother Patrick makes up MidAtlantic Computer Connection in Willards, Md. "It doesn't really welcome the individual with rights."
Meanwhile, the Baltimore Sun recaps last week at the Maryland Legislature:
Support is growing in the General Assembly for a plan to replace Maryland's new computer services tax with an income tax surcharge on top earners, suggesting that the coming weeks could become a reprise of the debate that nearly scuttled November's special legislative session.Not to mention the $1.4 billion in tax increases passed by the Legislature last year.
Are lawmakers unaware of the mobility of businesses? Or employers? Of employees? According to "Rich States, Poor States," a report by Arthur Laffer and Stephen Moore written for the American Legislative Exchange Council, Maryland ranked 32nd among the states in economic outlook, and that was BEFORE the tax increases. Delaware ranked 22nd. Virginia ranked sixth.
More coverage at the Maryland Chamber Blog.
Posted by Carter Wood at 9:03 AM | Click here to comment | Send to a Friend
March 15, 2008
Spurring Investment, Growth in Louisiana
Another special session of the Legislature has concluded in Baton Rouge, giving new Gov. Bobby Jindal a quick record of success. Notable is his strategy for making Louisiana a more attractive place for investment. In the first session, pass ethics reform to drive out corruption and ensure the rule of law. In the second, reduce the costs of doing business:
Lawmakers passed bills to eliminate a 1 percent sales tax that businesses pay on utilities, an estimated annual savings to Louisiana companies -- as well as a loss of state revenue -- of $69 million. They also passed an expedited phaseout of taxes on corporate debt and on manufacturing machinery and equipment. Those taxes were widely seen as burdens on companies that expand their operations, therefore placing Louisiana at a competitive disadvantage with other states.Ah, we see the governor recognizes the competitive environment in which Louisiana exist. Would that some of federal officials acknowledge the same is true for the United States and the global economy."Our current tax code is the greatest gift we can give our neighboring states," Jindal said of the business taxes that will be cut under the new laws.
Posted by Carter Wood at 12:37 PM | Click here to comment | Send to a Friend
Larry Kudlow Interviews President Bush
A transcript of the interview is here. Much talk of dollar policy, with the President affirming his belief in the "strong dollar."
Posted by Carter Wood at 11:32 AM | Click here to comment | Send to a Friend
March 14, 2008
We Compete in a Global Economy
Yesterday's budget votes in the House and Senate went whistling past the graveyard of global competition, willfully ignoring the reality that their other countries are cutting their corporate tax rates to improve their competitive positions. From The Wall Street Journal:
WASHINGTON -- Congress endorsed letting many of President Bush's tax cuts expire during largely symbolic voting on budget blueprints.Time to turn again to the Tax Foundation's work on corporate tax rates across the world as reported in its Fiscal Fact No. 108 from last October:Certain marginal tax rates and reduced rates for long-term capital gains and dividends, which are set to expire at the end of 2010, wouldn't be extended under a budget blueprint passed by the House yesterday and in a separate plan passed late last night by the Senate.
Five countries in the Organization for Economic Cooperation and Development (OECD) cut their corporate income tax rates in 2006, and eight more, including Germany, will have cut their rates by January 1, 2008.In the OECD, only Japan's 39.5% rate is higher than thef U.S. rate right now.
Posted by Carter Wood at 8:45 AM | 1 comment; click here to read it or submit your own! | Send to a Friend
March 13, 2008
Learn from History: Lower Tax Rates to Compete
Mark Bloomfield, President and CEO of the American Council for Capital Formation does an excellent job in today’s Wall Street Journal of laying out the case for a lower tax rate on capital gains from a historical perspective and debunking the myth that lower capital gains tax rates are “tax breaks for the rich.” As Mr. Bloomfield so accurately states in his column, "How We Beat the '70s":
Mainstream economists know that lower capital gains taxes result in lower capital costs, more savings and investment, and a strong economy. And ordinary citizens understand that low taxes on capital gains make it possible for them to buy a new lathe or the newest software, which will give them the chance to compete effectively in today’s global economy. Retirement security is also at stake. Low taxes on capital gains allow Americans to build up larger nest eggs.
From our perspective here at the NAM, there is strong evidence that the investment tax relief enacted in recent years—both the lower tax rates on capital gains and dividends—has played an important role in spurring economic growth. Any talk of raising these rates is, at best, irresponsible and, at worse, a serious threat to our country’s economy. NAM members believe it is critical that Congress make these investment tax cuts permanent.
And while they’re at it……policy makers also should significantly reduce the U.S. corporate long-term capital gains tax rate. For corporations, capital gains represent the after-tax proceeds retained by a company for future investment in new business ventures or for dividend payments to shareholders. The current 35 percent rate on corporate capital gains — one of the highest tax rates on corporate capital investment in U.S. history—creates a “lock-in” effect that discourages corporate taxpayers from selling appreciated assets because the tax cost significantly reduces their after-tax return on investment. In contrast, reducing the corporate capital gains rate will enable U.S. corporations to redeploy and invest capital in its most productive use and contribute to economic growth and job creation.
Posted by Dorothy Coleman at 12:40 PM | Click here to comment | Send to a Friend
Washington Post to Employees: Skew You
Today’s Washington Post editorial page brings up the same old tired arguments against repealing the estate tax. They recycle the one that we always hear about how the tax doesn’t hit very many people – and fixing it would be a “skewed priority.”
It’s true – it’s a tax that you only pay once – when you die – so each year the number of people it hits isn’t very high. But, the way the tax is applied is unfair and unworkable. It forces heirs to sell off businesses to pay the tax – which means factories are shut down and jobs are lost. If even one business is lost to bad policy, than that policy should be changed.
Let the Washington Post go to the workers who are unemployed because of the tax and explain to them that they’re only one business – that helping them really would have been a “skewed priority.”
Posted by Dena Battle at 9:47 AM | 1 comment; click here to read it or submit your own! | Send to a Friend
March 11, 2008
The Global Race for R&D
How does the United States, a world class leader in innovation, retain its competitive position in a global race for R&D investment dollars? Not by allowing the R&D credit, a proven incentive for spurring additional R&D, to expire 13 times since the credit was created more than 25 years ago. What kind of message about our commitment to innovation does the United States send the world with an on-again, off-again R&D incentive?
The credit expired more than two months ago. Policy makers need to turn the page and end the embarrassing history of repeated lapses of the credit. The R&D credit is a proven incentive for innovation. What are they waiting for?
Posted by Monica McGuire at 7:45 AM | Click here to comment | Send to a Friend
March 6, 2008
Nothing's Certain Except for ....
Don’t like the tax? Just change the name.
The Senate Finance Committee is going to hold a hearing on March 12th on the estate tax, part of a series of hearings that Chairman Baucus promised to schedule last year. Unfortunately, the focus of the hearing will be to replace the estate tax with … an inheritance tax. That’s right. We’ll replace one bad tax with another bad tax.
How is an estate tax different from an inheritance tax? Well, the estate tax is placed on the estate of the person who dies. The inheritance tax is placed on the person who inherits the estate. The reality is, regardless of who specifically is taxed, when a business is passed on to an heir and there isn’t liquid capital to pay the tax – then the business is sold off to pay the tax. You can call it the estate tax or the inheritance tax. We call it the death tax because it kills family businesses. End of story.
Watch for future hearings from the Senate Finance Committee: Replacing the income tax with a wage tax. Replacing the sales tax with a buyers tax. The list goes on.
Posted by Dena Battle at 8:25 AM | Click here to comment | Send to a Friend
March 5, 2008
Little Plastic Bags Promote Drug Sales
Chicago, the City of Broad Shoulders has become the City of Big Nannies.
Tiny plastic bags used to sell small quantities of heroin, crack cocaine, marijuana and other drugs would be banned in Chicago, under a crackdown advanced Tuesday by a City Council committee.Because drug dealers are too stupid to figure out other ways to package their wares.Ald. Robert Fioretti (2nd) persuaded the Health Committee to ban possession of "self-sealing plastic bags under two inches in either height or width," after picking up 15 of the bags on a recent Sunday afternoon stroll through a West Side park.
Lt. Kevin Navarro, commanding officer of the Chicago Police Department's Narcotics and Gang Unit, said the ordinance will be an "important tool" to go after grocery stores, health food stores and other businesses.
Via Jim Geraghty, who in an item of Sen. Barack Obama notes other Chicago urbanity:
[A] far-reaching smoking ban in all restaurants and bars, a ban on trans fats, a ban on foie gras, a ban on street performers, a ban on advertisements for The Nativity Story movie, a ban on the ownership of live chickens, a ban on "second hand smoke from wood-burning stoves and fireplaces" (okay, that one was Elk Grove), and a law that would effectively ban elephants.That'll stop those drug-dealing elephants.
Big Nannies? Or Ninnies? The City has high sales taxes, too.
UPDATE (3:15 p.m.): Buried the lede. Here it is, courtesy today's Wall Street Journal:
Over the weekend, Chicago lifted itself to the top of a tax dishonor roll: The city's cumulative sales-tax rate is now the steepest of any major metropolitan area in America, at 10.25%. That blows past the former valedictorian, Memphis (9.25%), as well as New Orleans (9%), Denver (8.6%), and even New York and Los Angeles. Congratulations.
Posted by Carter Wood at 1:49 PM | 1 comment; click here to read it or submit your own! | Send to a Friend
Letting Tax Cuts Expire -- What it Actually Means
From today's Washington Post, reporting on the new Senate Democrats' budget proposal:
The spending would push the federal deficit to more than $350 billion in fiscal 2009, but Senate Budget Committee Chairman Kent Conrad (D-N.D.) said the blueprint would erase the deficit within four years, producing a $160 billion surplus in 2013.So, what are those popular tax measures? Here’s a quick list:To get there, however, Democrats assume all of President Bush's first-term tax cuts would expire on schedule in 2010, bringing in billions in revenue. But if the most popular tax measures were extended, as the two Democratic presidential candidates have promised, the surplus would all but evaporate, Conrad said.
That’s a tough list to choose from…
Posted by Dena Battle at 11:30 AM | Click here to comment | Send to a Friend
March 4, 2008
Good Ideas for Manufacturing (Sorta)
The EPI’s Susan Helper writes in today’s Washington Post:
What kind of good ideas? Helper recommends that we “start with more investment in education, training, and research and development.” In that, the NAM agrees, but it's not enough. Addressing the skills gap, improving our national infrastructure and promoting R&D are a start, but we also need to address the serious challenges faced by manufacturers in the United States -- things like soaring energy costs, the high costs of civil litigation, and a corporate tax structure that discourages investment.One-tenth of all U.S. jobs are in the manufacturing sector -- good jobs that pay 20 percent more than the national average. Manufacturing accounts for 12 percent of gross domestic product and over half of our national spending on research and development. Because even the most modern economies cannot thrive without making things. Good ideas that will help presidential candidates win in Ohio today can also help America win in the global economy. Let's remember that, long after the votes are counted.
Today’s manufacturers need pro-growth policies put in place to help them compete in this global market place. Candidates who advocate one set of policies, however credible, without addressing the costs of doing business aren't doing anyone a favor.
Posted by Keith Smith at 5:21 PM | Click here to comment | Send to a Friend
Sen. Judd Gregg on Budget Reconciliation
How's that for a grabber?
Anyway...Sen. Judd Gregg (R-NH), ranking member on the Senate Budget Committee, took part in a conference call with a few bloggers yesterday to take issue with the Senate Democratic budget, which will be marked up this week. (Congress Daily summary here.) Gregg seemed fired up, taking heated issue with the larger government, bigger spending and higher taxes he expects from the majority.
Acting on instructions from the NAM policy mavens, we asked about the reconciliation process. That's the only real hammer the Budget Committee has, using a reconciliation resolution to demand specific spending actions by committees in charge. Reconciliation-instructed actions are then not subject to filibuster and can pass by a 51-49 vote.
In the past, reconciliation has been used to cut spending, but Gregg says last year the practice was reversed when Democrats juggled student loan spending and reimbursements to increase spending by some $19 billion.
And this year?
I expect they’re going to do the same game, but they’re going to use it much more aggressively this year – probably use it on Medicare, probably use it on Medicaid, maybe use it on S-CHIP, maybe use it on some agriculture programs. I’m expecting them to be significantly expanding the size of government by using reconciliation protection in getting around the filibuster.You can read the transcript of Gregg's reconciliation-related remarks by clicking here. The audio file is here, but the sound levels are low.Q: And is there any way to resist that?
A: Well, in the end, as long as we have a Republican president, their proposal would be subject to a veto, but it does mute the ability of Senate Republicans to use the filibuster to stop something coming right out of the gate.
UPDATE (9:45 a.m.): Gregg's basic argument, the political critique of the Democratic budget, as reported by Townhall.com.
Posted by Carter Wood at 9:37 AM | Click here to comment | Send to a Friend
March 3, 2008
Ohio v. Texas the Day before the Primaries
So tomorrow the eyes of America will be on these two states moving in different directions. Ohio has an economy burdened by high taxes and work rules that impose heavy costs on employers. Texas embraces free trade, keeps taxes low, doesn't impose unions on business and has tooled itself for 21st century global competition. Ohioans may not like to hear this, but for any company considering where to locate a new plant or move an existing one, the choice between Ohio and Texas isn't even a close call.The challenge for our national economy in a world of competition is to become more like Texas and less like Ohio.
Posted by Carter Wood at 7:33 AM | Click here to comment | Send to a Friend
February 29, 2008
R&D Tax Credit: If Not Now, When?
Today—February 29—means that 59 days have passed since the R&D tax credit expired at the end of last year. How long will manufacturers have to wait for Congress act to renew and strengthen this jobs credit? We’ve only heard promises from lawmakers to restore “business extenders,” yet seen no action to date to fulfill that promise. Meanwhile, most of our major trading partners offer more attractive—and permanent— R&D incentives. Right now, with no credit in place, the United States is clearly at the bottom of the pile.
Allowing this tax provision to expire 13 times, which is exactly what Congress has done since 1981, weakens the credit’s incentive value to boost private research and development spending, and ranks among the worst of tax follies by a powerhouse country like the United States. If companies cannot rely on the credit for the duration of an R&D project—for manufacturers typically 5-10 years—companies performing R&D are going to be enticed to look at the 20 OECD countries offering more generous R&D tax incentives.
We’ve got to ask ourselves, if not now, when will Congress seamlessly renew and strengthen the credit?
Posted by Monica McGuire at 9:25 AM | Click here to comment | Send to a Friend
February 28, 2008
Well, Hugo's Happy
From CQ Politics, a story on passage of H.R. 5351, the $18 billion tax increase on oil and natural gas producers.
Meanwhile, Citgo Petroleum Corp. would continue to receive a 6 percent deduction for domestic manufacturing that the largest firms would lose.¿Cómo se dice "perverse incentive" en español?Citgo, which refines oil and markets and transports gasoline in the United States, is owned by a subsidiary of the government-owned Petróleos de Venezuela, S.A., or PDVSA. Because Citgo does not drill for oil and gas domestically or abroad, it does not fall under the bill’s definition of companies that will lose a major tax break.
The five big companies targeted by the bill — Chevron, BP, ExxonMobil, Shell and ConocoPhillips — all produce and refine oil and sell gasoline in the United States, and therefore under the bill would lose the domestic manufacturing deduction they received as part of a corporate tax law in 2004 (PL 108-357).
Although our first instinct was to think that the Citgo-Joe Kennedy propaganda campaign really did pay off, it's more likely that this is just what happens when politicians pick winners and losers in the marketplace.
Posted by Carter Wood at 8:56 AM | Click here to comment | Send to a Friend
February 27, 2008
House Passes Tax Increase on Oil and Gas
Catching up on the day's news, we see the House passed H.R. 5351, the Renewable Energy and Energy Conservation Tax, by a vote of 236-182. Eight Democrats voted no, 17 Republicans voted aye. Roll call here.
House Republican Whip Roy Blunt issued a statement:
As oil settles in above $100 a barrel, and natural gas makes its way toward $10 a thousand, the only thing the bill on the floor tonight would do is ensure today’s prices turn into tomorrow’s bargains.Majority Leader Steny Hoyer also had a statement:
Last year alone, the five largest oil companies had a combined profit of $123 billion – which only provokes this question: Do these companies need and deserve these taxpayer subsidies? The answer, of course, is no.
Posted by Carter Wood at 6:43 PM | Click here to comment | Send to a Friend
Raising Taxes on Energy, a Key Vote
The National Association of Manufacturers today sent a "key vote" letter to members of the House of Representatives, expressing NAM's opposition to H.R. 5351, the Renewable Energy and Energy Conservation Tax Act. There's much to like in the way of incentives for alternative fuels and energy efficiency, but the bill's tax increases make the entire legislation unacceptable. From the letter:
In particular, we are concerned about provisions that would make certain oil and gas firms ineligible for the Sec. 199 deduction for domestic manufacturing activity and limit the benefit for other energy companies. The NAM believes that the energy debate should focus on increased production of all types of energy, improved conservation and efficiency, more research on technology and alternative energy, increased access to domestic sources with continued environmental protections, and improved distribution – not on new taxes on one particular industry."Key votes" are those the NAM uses to determine a member of Congress' voting records on issues the association deems important to the manufacturing economy.Unfortunately, we have little choice but to oppose the bill because of these tax provisions.
Posted by Carter Wood at 9:31 AM | 3 comments; click here to read them or submit your own! | Send to a Friend
What It Takes to be 'A Patriot'
From our perspective here at the NAM, U.S. corporations are true patriots. They play an integral role in our society and are major contributors to our country’s economic growth and strong democratic government. Corporate America provides well-paying jobs for employees, investment opportunities for shareholders and high-quality products and services for consumers both here and abroad.
That’s why we are more than a little concerned about the Patriot Employers Act (S. 1945) that includes a laundry list of requirements for a company to qualify as a “patriot.” The Wall Street Journal today does a good job of explaining why this legislation would actually destroy jobs and make U.S. companies less competitive.
We agree wholeheartedly with the Journal that “what's really unpatriotic is the 35% U.S. corporate tax rate.”
Posted by Dorothy Coleman at 9:21 AM | Click here to comment | Send to a Friend
Work Smart, Tax Smart -- The R&D Tax Credit
Lots of good articles on tax policy in the February/March issue of The Ripon Forum, the magazine of the Ripon Society. Featured is a piece by National Association of Manufacturers President John Engler on the R&D tax credit, "Incentive and Inventive: Smart Tax Policy Needed to Promote U.S. Manufacturing."
It’s a comment many of us heard in our early years on the job, delivered by a demanding boss or exasperated coworker: “Work smarter, not harder!”The NAM has a recent ManuFacts summary of the R&D tax credit available here.Manufacturers in the United States take those words to heart. They have to.
Although no strangers to hard work, America’s manufacturers know that their competitive advantage in the hard-fought global marketplace lies in the ability to work smarter. Other countries will boast lower costs of labor or raw materials, so it’s skilled and creative people who ensure America’s competitive edge – the edge that builds on research, development, investment and innovation.
For many years, a bipartisan consensus in Congress has helped maintain that American edge. Republicans and Democrats both have supported smart policies that encouraged the R&D and innovation that lead to new products, technologies and manufacturing processes. Yet year after year, Congress still does a dumb thing: It allows the federal research and development tax credit to expire, throwing U.S.-based business into a world of uncertainty and frustration.
Posted by Carter Wood at 7:56 AM | Click here to comment | Send to a Friend
February 26, 2008
Conflicting Signals on Energy and Taxes
The U.S. House is expected to vote Wednesday on H.R. 5351, the Renewable Energy and Energy Conservation Tax Act of 2008. The legislation raises taxes on oil and natural gas production by about $18 billion, targeting one sector of the energy industry to subsidize others -- wind, biofuels, solar power, etc.
The tax increase is supported by Democratic lawmakers disappointed in the Senate's rejection of similar provisions in last year's energy bill.
Meanwhile, out in North Dakota, state Democratic legislators are introducing tax cuts for oil production.
Rep. Dorvan Solberg, D-Ray, will be introducing legislation to extend the tax holiday for new wells drilled in the Bakken Formation.How does this work, exactly? Tax cuts are needed to encourage oil production at the state level, but tax increases are necessary at the federal level? Seems...inconsistent.“The drilling incentives have increased the amount of drilling, and the development has been a real positive for area communities as well as oil companies,” Solberg said. “I would like to see this activity continue. The benefits for the state are well-documented and that includes my own District 2.”
The legislation passed in 2007 had a sunset clause to end the holiday. Solberg’s legislation would drop the sunset and give a tax holiday on the first 75,000 barrels, an exemption to the extraction tax the state collects.
Posted by Carter Wood at 5:12 PM | Click here to comment | Send to a Friend
February 24, 2008
Rich States, Poor States and New Jersey
A theme developing, a tax-and-spend Sunday here at Shopfloor.org. Or as The Wall Street Journal's weekend editorial on New Je