Friday, June 17, 2011

RightOnLine - Tax Reform breakout session

Tax Reform: A Return to Economic Growth is one of the breakout sessions I attended. It was moderated by AFP's Steve Lonegan and featured Ryan Ellis from Americans for Tax Reform, JD Foster from Heritage Foundation and Dick Patten from American Family Business Institute.

Pictured, left to right, are Lonegan, Ellis, Foster and Patten

Here are my notes from their comments:

Lonegan started with a comment that I absolutely loved (paraphrased): only in government would a $200 tax increase be called 'small,' while a $.30 tax increase is 'large.' He then detailed how successful New Jersey, his home state, had been at the turn of the century with major economic growth and the establishment of many national corporations. But tax policy - New Jersey is one of the highest taxed states in the nation - destroyed most of that.

Patten was the first speaker and complimented the success in Ohio of repealing the death tax. He said that Minnesota is their next target. He is proud of the fact that in the last election, over 500 candidates signed the death tax pledge and that, currently, there are eight bills in Congress to repeal the death tax. He expects that HR 1259 Death Tax Repeal Permanency Act of 2011 will be the one that goes forward. It has 118 co-sponsors, including members of the Blue Dog Democrats and the Congressional Black Caucus. Sen. John Thune has pledged to sponsor mirror legislation in the Senate. Patten expects this bill to see action in the House Ways and Means committee in the July-September time frame.

He then talked about why the inheritance tax is so detrimental to American philosophy and way of life. It started, he explained, in 1215 with the Magna Carta - 1/3 of which is devoted to addressing inheritance/property rights. For centuries, the concept of private property rights was sacrosanct, until Karl Marx came along. Marx's position was that all rights of property inheritance needed to be abolished, or confiscated by the state. It was his, and his followers, thought that 'inheritance isn't a natural right but merely a civil convenience granted by a benevolent government.' Patten explained that we do have property rights - the fruits of our labor do not belong to government so that they then need to be 'returned' upon our death. If that were the case, we'd be serfs to that government.

Of course, this is certainly contrary to our founders' perspective, but many on the left have gone so far as assert that no one should be able to leave an inheritance to their descendants. In the end, he said, the rallying cry needs to be "No Taxation without Respiration!"

Ellis was up next with an update on the Taxpayer Protection Pledge that ATR has sponsored for several years now and he is proud of the number of elected members of Congress who have signed the pledge. He used the ethanol issue as an example of why the pledge of 'no new taxes' is so critical.

Ethanol is supported in three ways, he explained: a tax credit to incentivize production; a tariff to restrict foreign ethanol and protect domestic production; and a mandate by government for ethanol use. I found it startling that 98% of ethanol production is a direct result of the mandate and only 2% of production is due to tariff and tax credit incentives. While there is an amendment in the Senate to kill the tariff and repeal the tax credits, without addressing the mandate, there really is no solution. Sen. Jim DeMint has an amendment that not only repeals the mandate, but ties it to the elimination of the death tax.

As Ellis detailed, tax credit destroy markets, change what prices would have normally been and cause ruin to the economy. In fact, this is true regardless of what the tax credit is for (including such credits as mortgage interest deductions), so eliminating a specific tax credit - or even all of them - without corresponding cuts in spending is bad policy. This is why ATR supports the approach of tax reform being revenue neutral. The Taxpayer Protection Pledge is critical in that approach.

The last speaker was Foster who started with MOTO (master of the obvious) statements like "tax reform is long overdue." Current tax policy distorts how we invest and save and how companies plan for capital items. It also wastes money in time and compliance. But, he warned, we must be vigilant as tax reform can be a Trojan horse. In the guise of 'closing the tax loopholes' we may just get more revenue to government and even more spending as a result. The idea of tax reform is being hijacked by those who just want more money to government.

Many Democrats and people on the left want to promote the idea that raising taxes is inevitable - if we truly want to address the deficit and the debt. Heritage rejects this position and, instead, published "Saving the American Dream," a plan to fix the debt, cut spending and restore prosperity, to prove it. As Foster explained, this tax reform plan balances the budget in 10 years without raising taxes - and it continues to keep the size of government small by limiting government to only things that are necessary. He encouraged us all to read the Heritage plan and support it.

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