June 27, 2006

Gas Incentives to Use More Gas?

Legislators at every level across the United States are trying to initiate gas incentive programs to combat the fuel crisis. About a month ago the automobile industry tossed its hat in the ring too. Sadly, however, GM did it in a way that directly contrasts the strides the country as a whole should be making to lessen its dependency on oil. As it is explained by the Associated Press, each month for one year GM will give customers who buy certain vehicles,
“A credit on a prepaid card based on their estimated fuel usage. Fuel usage will be calculated by the miles they drive, as recorded by OnStar, and the vehicle’s fuel economy rating. GM will credit drivers the difference between the average price per gallon on their state and the $1.99 cap.”
GM's official press release says that “this program gives consumers an opportunity to experience the highly fuel-efficient vehicles GM has to offer in the mid-size segment.” You know, mid-sized vehicles such as the illustrious gas guzzlers Hummer H2 and H3, Chevy Tahoe and Suburban, and GMC Yukon.

Clearly, the incentive programs established in Florida and California by General Motors are not a step forward in our country’s battle with oil and energy over-consumption. Instead, they are a very irresponsible step backward. Scientists, environmentalists, and individuals concerned with our country’s overdependence on foreign oil are looking to alternative and renewable fuels and to pushing the national fuel economy higher. While recent incentive programs encompass a wide range of perspectives, most are at least willing to try something new, something that may one day be a key to solving the gas problem. Not so with GM. This recent gas program shows GM’s true dedication: to selling expensive and inefficient models with no regard to social responsibility. The global sales leader in the automobile industry is digging in its heels to keep the status quo, and whether you look at it from the perspective of environment, pocketbook, or oil independence, it is a status quo that few Americans can afford.

June 23, 2006

The House has voted repeatedly to end the estate tax and they came one step closer Thursday when they reached a “compromise” with Democrats that is nothing less than a virtual repeal of the tax. While the bill does not end the estate tax altogether, the tax becomes a vestige of its former self. All but about 5000 estates would be exempt from paying any estate taxes at all since individuals could leave up to five million dollars and couples ten million dollars to their heirs tax free. On top of this, although larger estates would still pay tax, rates would drop to those that investors pay for capital gains, currently fifteen percent. Estates worth twenty five million or more will pay double this number.

Forty three democrats crossed party lines and voted to restrict the tax. It may bring you comfort to know that two republican representatives crossed the party line and voted against the bill, don’t get your hopes up. They objected not to the fiscal irresponsibility of borrowing money in order to support this tax cut, but to the fact that the compromise went too far. As it will still cost the treasury roughly sixty billion dollars a year, or roughly 80% as much as simply ending the tax altogether, I say the compromise didn’t go nearly far enough.

Interested in how your representative voted? Click here to see the complete roll call of the vote to pass the Permanent Estate Relief Act.

Democratic Senators crossing party lines to vote in favor of the act:

Abercrombie (HI) Baird (WA) Barrow (GA)
Bean (IL) Berry (AR) Bishop (GA) Boren (OK)
Boswell (IA) Boucher (VA) Boyd (FL) Cardoza (C)
Chandler (KY) Clay(MO) Costa (CA) Costello (IL)
Cramer Cuellar (TX) Davis (TN) Edwards (TX)
Filner (CA) Ford (TN) Foxx Gordon (TN)
Herseth (SD) Hinojosa (TX) Jefferson (LA)
Larsen (WA) McIntyre (NC) Melancon (LA)
Mollohan(WV) Peterson (MN)Rahall (WV)
Ruppersberger (MD) Salazar (CO) Scott (GA)
Skelton (MO) Tanner (TN) Thompson (CA) Wynn (MD)

Republican Senators crossing party lines to vote against the act:

Doolittle (CA) Tiahrt (KS)

Now the bill will go back to the Senate. With the new compromise and the additional sweeteners, there is no guarantee that the Senate will once again vote to uphold the estate tax. Click here to contact your senators and make sure they vote the right way, saying no to the Permanent Estate Relief Act.

Despite Massive Tax Give-Aways to Wealthy, Congressional Leaders Want Budget Reforms to Slash Spending

While not showering the richest one percent of Americans with costly tax breaks, conservative leaders in Congress have been vocal about cutting back spending on ordinary Americans. Due to the unpopularity of cutting programs that are enjoyed by large numbers of people, many legislators are eyeing budget process rules that will make it easier to enact cuts in services -- without touching tax breaks targeting special interests. On the same day that it voted to slash the estate tax at a cost of over $60 billion a year, the House also voted to give the President a "line-item veto" that would allow the President to single out spending provisions in an appropriation bill or a bill to expand entitlements, withhold funds and force Congress to vote to approve or reject the rescission, or cancellation of the spending. The President would be allowed to withhold funds for a total of 90 days -- even if Congress rejects the rescission. (The President had proposed that he be able to withhold funds for 180 days).

The bill faces an uncertain fate in the Senate, where the Budget Committee on June 20 approved a bill sponsored by Chairman Judd Gregg (R-NH) that includes more sweeping changes to the budget process. For example, Gregg's bill would also include caps on discretionary spending over the next three years that would force steep cuts. It would also create a commission dominated by the majority party that could propose eliminations or cuts in entitlement programs that would be filibuster-proof in the Senate. Both the House and Senate bills fail to restrain tax breaks and neither include the pay-as-you-go rules that Democrats point out actually reduced deficits in the 1990s. These rules would require that spending increase or tax break be offset with spending cuts or tax increases elsewhere. Judd Gregg called these rules a "stalking horse" for tax hikes.

One of the strangest components of this debate concerns how the line-item veto should affect tax breaks. The White House proposed that only tax breaks benefitting fewer than 100 people should be open to cancellation under the President's line-item rescission. Even that strict limit had a loophole; the tax break would be protected if it applied to people in the same industry or owning the same type of property. The casual observer who is not well-versed in tax policy might ask just what type of tax break would be open to the line-item rescission under these rules.

Remarkably, the House wants even fewer tax breaks to be vulnerable. Under its bill the President could only strip a tax break provision that benefits a single individual or company -- and the chairmen of the tax-writing committees in the House and Senate could decide unilaterally that such a provision is not a "targeted tax benefit" and therefore not open to the line-item veto. It seems unlikely that these chairmen would identify their own provisions as pork that needs to be cut back by the President.

In the Senate Budget Committee, Gregg wanted his bill to at least appear more balanced. Under his bill any tax break can in theory be targeted with the line-item veto, but even it would require that the provisions be defined as “targeted tax benefits” by the Joint Congressional Committee on Taxation before they could be stripped. The Joint Committee is run by a director appointed by the chairmen of the tax-writing committees and Gregg explicitly stated that the director would keep that in mind.

The sponsor of the House bill, Paul Ryan (R-WI) said he did not want the line-item veto used by the President to rewrite tax policy. He even pointed out that some targeted tax breaks are very useful, like those going to manufacturers of "orphan drugs," medicines that supposedly would not be created if not for tax incentives.

It's hard to believe that a President would try to strip a provision that encourages the manufacture of potentially life-saving drugs. What kind of skewed priorities does the House think American Presidents have? Then again, did we mention that President Bush supports the House bill to slash the estate tax for the wealthiest inheritors in America...

June 22, 2006

Estate Tax Compromise?

As most readers of this blog know, repealing the estate tax is a really bad idea. It is one of the most progressive taxes on the books and provides a steady stream of much needed revenue. That hasn't stopped some lawmakers from aggressively trying to repeal the estate tax. Today, House Republicans introduced a compromise designed to win support from moderates in both parties.
The proposed compromise offered in the House exempts $5 million of an individual's estate, $10 million of a couple's, from taxation. Business groups and lawmakers successfully pushed for automatic increases to make sure that figure does not erode with inflation.

Estates up to $25 million would be taxed at rates equal to capital gains, currently 15 percent but scheduled to rise to 20 percent in 2011. Estates larger than $25 million would be taxed at rates twice that of capital gains, or 30 percent now and 40 percent when the scheduled capital gains tax increase takes effect.
Without providing an in-depth analysis, it should be clear that this proposal is still extremely problematic. The compromise would still result in a cut of nearly $280 billion dollars over the next ten years. Given the nation's precarious fiscal situation, tax cuts for the wealthy are simply bad public policy.

The efforts to get support from moderates in both parties are more interesting than the actual compromise bill. As reported by the New York Times yesterday, the new proposal contains major tax cuts for timber companies.
It includes a tax cut that would save timber companies about $900 million over the next three years, a new twist that could win as many as four more Democratic votes in the Senate.
Two of the timber industry's strongest advocates are the Democratic senators from Washington,— Patty Murray and Maria Cantwell, who both voted with other Democrats against blocking a filibuster on the estate tax.

The Weyerhaeuser Corporation, the giant paper and forest products company, is based in Federal Way, Wash., and the state is a major timber-producing area.

Other Democratic Senators, such as Mark Pryor and Blanche Lincoln of Arkansas and Mary L. Landrieu of Louisiana, were co-sponsors of a similar timber tax cut last year.
Legislators from both parties admit that the timber cut has nothing to do with the estate tax, but that hasn't stopped elected officials from trying to hammer both proposals through Congress. It appears that the only way Republicans get muster enough support for this legislation is by dangling targeted tax cuts in front of Democrats. Not exactly the best way to restore public confidence in a town wracked by ethics scandels.

June 14, 2006

South Carolina - Compromise a Mixed Bag

South Carolina legislators finally decided on a property/sales tax swap compromise. Legislators came to an agreement that capped assessment increases, raised the sales tax rate, and lowered the sales tax on groceries. The legislation is a fine example of how sometimes our political system can foster compromise. But I'm left wondering if legislators missed the mark by not doing more for those with the least.

Here are a few more details about the legislation:

This fall a constitutional amendment will go before voters which, if passed, will limit property tax assessments from growing more than 15% over five years. Historically these type of assessment caps have been very expensive and help mostly those with the most ability to pay. To take a deeper look about why capping assessed value growth isn't necessarily the most fair property tax reform mechanism click here to read a policy brief about this very topic.

Secondly, the legislation increases the sales tax rate from 5 to 6 percent. Some of the revenue generated from this tax increase will go to offset homeowner property tax bills. On its face this seems like a defensible policy. However, this legislation does nothing to help renters and the regressive sales tax increase does no favors for low and middle-income families.

The final component of this compromise is that the sales tax on groceries was reduced from 5 to 3 percent. Lowering the sales tax on food is an admirable step, yet it's quite costly and poorly targeted. If lawmakers were concerned with making the tax system more fair for everyone they had a myriad of other options available including a sales tax credit. For more about progressive options for sales tax relief click here.

Some South Carolinians aren't pleased with this legislation for one critique, click here. This legislation certainly isn't ideal and depending on where you're sitting compromises never make anyone 100% happy. But while this legislation certainly isn't ideal, the compromise is better than many alternatives legislators initially discussed.

But perhaps there's some hope that the next time tax reform is discussed legislators will do more for working families.

Parts of this post were originally published in CTJ's Tax Digest, a weekly email that highlights state and federal tax trends across the country. If you'd like to subscribe to the digest send an email to: ctj@ctj.org

June 09, 2006

Estate Tax Win!

Yesterday, a procedural vote in the United States Senate failed by a 57-41 vote, ensuring that the federal estate tax will not be fully repealed. Congratulations to the U.S. Senators who decided that estate tax repeal is not in the interest of the vast majority of Americans.

The failure of the cloture vote sends an important signal to Congress and the Bush Administration that Americans are concerned about the growing inequality of wealth in America—and that we believe the estate tax can play an important role in preventing the creation of a new American aristocracy. For a look a brief that studies growing wealth inequality click here.

However, we're not out of the woods yet. Senate tax writers are currently negotiating "compromise" legislation that could cost nearly as much as full repeal. Reducing the federal estate tax rate to 15 percent or even to the 30 percent top rate proposed most recently by Senator Kyl (R-AZ) would offer huge tax cuts to the largest estates, with little or no benefit to smaller estates. Instead of enacting further tax cuts, Congress should undo the damaging estate tax cuts enacted, at the Bush administration’s request, in 2001.

To view a full statement about yesterday's vote from Citizens for Tax Justice click here.

Interested to see how your Senators voted?

Four Senators crossed party lines and voted for debating estate tax repeal.
Here's a list of those Senators complete with links to their offices:

Max Baucus (Montana)
Blanche Lincoln (Arkansas)
Ben Nelson (Nebraska)
Bill Nelson (Florida)

Two Republicans crossed party lines and voted against
debating full repeal of the tax.
Lincoln Chafee (Rhode Island)
George Voinovich (Ohio)

Two Senators didn't participate in the vote:

Charles Schumer (New York) and Jay Rockefeller (West Virginia)

Did your Senators vote the right way? If so, be sure to tell them thank you! Click here to contact your Senators.

June 07, 2006

Line-Item Veto Proposal Aims to Cut Back Government Services But Leave Tax Breaks for Special Interests

Congress is considering its latest proposal to give the President something resembling a "line-item veto," the power to sign only part of a spending bill into law. Technically, this proposal is not a true line-item veto (which has been struck down by the U.S. Supreme Court as unconstitutional) but rather allows the President to withhold funds appropriated under a particular provision of a spending bill for 180 days and requires Congress to vote to approve or reject the rescission. Causing some controversy among legislators of both parties, the President's proposal would allow him or her to continue to withhold the funds for the duration of the 180-period even if Congress rejects the rescission. Currently, the President can only withhold funds for 45 days and Congress is not required to vote on a requested rescission. The proposed law has been introduced in the Senate by Majority Leader Bill Frist (R-TN) and in the House by Representative Paul Ryan (R-WI). In its current form it could be used to force Congress to cut back expansions in entitlement programs or to force the defunding of entire discretionary programs, including the 91 discretionary programs the President proposed to eliminate in his last budget proposal.

Most alarming from the perspective of fiscal sanity is that tax breaks targeted towards the rich or towards a very narrow group of people cannot be targeted for elimination by the President under the bill. Representative Ryan recently told an audience at the Heritage Foundation, "The goal of this is not to change tax policy to go after tax pork." Apparently he has an extremely narrow view of what constitutes "tax pork." Under his bill, the President can only hold up a tax provision and request its elimination if 1) the tax breaks will benefit 100 or fewer people and 2) the tax break is not targeted towards people in the same line of business or owning the same type of property.

In effect, Congress can pass any type of tax break that benefits 101 people, or a tax break that benefits 4 people in the same industry or who own the same type of property, and the President will have no power to strip the provision from the larger bill that contains it. The President will, however, be allowed to strip, say, all Head Start funding for 180 days even if Congress then votes to reject such a rescission.

Even the White House's usual allies are balking. Judd Gregg (R-NH), chairman of the Senate Budget Committee which will mark up the bill, said the proposal as drafted is a "'poke a stick in the eye of Congress' bill." For once we'd have to agree with him.

June 05, 2006

NEW Estate Tax Information Available!

This week the US Senate may be voting to repeal or drastically reduce the estate tax. The tax is paid on the value of an estate when a person dies. Currently the tax is levied on estates valued over $2 million for singles and $4 million for couples. In any way changing the tax to protect the wealthiest of the wealthy is pretty poor policy for several reasons - most of which you can read about in any major newspaper. Here's a great take on why the estate tax is an important anti-wealth gap measure from the Washington Post's Sebastian Mallaby. Also, this is a pretty compelling op-ed that ran in the Salt Lake Tribune.

Amidst all of the political debate there's some new numbers available which are quite significant. On Friday, the IRS quietly released new data showing estate tax payments by state for 2004. The data provide timely (but heretofore unnoticed) new evidence that in every state, the federal estate tax is all but irrelevant to residents of each state. Citizens for Tax Justice created easy to understand one-page fact sheets for all 50 states describing the new data, and showing the decline in estate tax payments in each state since 1998.

To view a document describing details from all the states click here.
To view a fact sheet about an individual state click here.

It's probably not very surprising based on rising exemption levels and creative accounting that the number of people who paid the estate tax actually declined over time - but it's a good point that is worth making again and again. By voting for repeal or a silly compromise Senators are saying that protecting the wealthiest of the wealthy is more important than the welfare of all Americans.

Hope these fact sheets are a helpful eye-opener!

Want your voice heard?
Tomorrow (June 6) is a national call-in day to support the estate tax.
Tell Your Senators to Oppose Repeal or Drastic Cuts in the Estate Tax
Call Toll-free, 800-459-1887.

The toll-free number is provided courtesy of the American Friends Service Committee which has launched a budget campaign, http://www.afsc.org/economic-justice/sos/