On February 1, the House Small Business Committee hosted a hearing on "The Path to Job Creation: The State of American Small Business." SBE Council member Mike Fredrich provided great testimony on the threats and uncertainties that continue to linger for small businesses. Committee staff put together this great highlight video of the hearing, which features Fredrich.
As summarized by House Small Business Committee Chairman Sam Graves (R-MO) regarding testimony provided by witnesses: "There is no doubt that the lack of certainty in burdensome regulatory requirements and complex tax structures coming from Washington continues to be an impediment for growth and job creation for small business owners. This must change sooner rather than later if we want to see economic growth and Americans back on the job.”
Karen Kerrigan, President & CEO
Showing posts with label taxes. Show all posts
Showing posts with label taxes. Show all posts
Monday, February 06, 2012
Thursday, March 26, 2009
Still More Taxes?
The Obama budget plan includes various tax hikes that will hurt entrepreneurs, investors, business and the economy. Those include higher personal income, capital gains and dividend tax rates on upper income individuals; keeping the death tax around; and imposing a cap-and-trade regulatory/tax scheme.
But that apparently is not enough. The March 25 Wall Street Journal reported the following:
A task force to, in effect, raise more taxes – is this really what the economy needs right now?
Congress is absolutely right to be concerned about the current explosion in government spending. But are they serious? Initial congressional budget numbers indicate more posturing than serious action on reining in spending.
Obviously, government looking to suck even more resources out of the private sector is not the answer to our budget or economic woes. If too much spending is the problem – which it is – then we obviously need sharp reductions in that spending, not higher taxes.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
But that apparently is not enough. The March 25 Wall Street Journal reported the following:
The White House said it would launch a search for new tax revenues, as Congressional leaders moved to scale back proposed spending increases and tax cuts in President Barack Obama's ambitious budget. The Obama administration plans to create a task force to consider elimination of corporate loopholes and subsidies, tougher enforcement against tax avoidance, and tax simplification, White House Budget Director Peter Orszag said late Tuesday.
A task force to, in effect, raise more taxes – is this really what the economy needs right now?
Congress is absolutely right to be concerned about the current explosion in government spending. But are they serious? Initial congressional budget numbers indicate more posturing than serious action on reining in spending.
Obviously, government looking to suck even more resources out of the private sector is not the answer to our budget or economic woes. If too much spending is the problem – which it is – then we obviously need sharp reductions in that spending, not higher taxes.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
Monday, March 23, 2009
The House, the Constitution, and the 90% Bonus Tax
As I’ve made perfectly clear throughout my career as an economist and policy analysis, I am not a fan of government bailing out private businesses. Taxpayer dollars are thrown away, the size and reach of government expands, moral hazard is created, and the entire market system is undermined.
And of course, whenever government sticks its nose into something, along with it comes politics.
Last week, the U.S. House of Representatives served up politics at its most pandering. It voted by 328-93 to approve a 90% surtax on bonuses to employees earning more than $250,000 at companies that received at least $5 billion in government financial rescue dollars. The bill would set up the tax retroactively to December 31, 2008, and was generated in response to outrage over bonuses handed out at AIG, which has been one of the government’s biggest bailouts.
There are a good number of reasons to oppose this political fit by members of the House.
But one supersedes all others. It is plainly unconstitutional. Article I, Section 9 of the U.S. Constitution states: "No Bill of Attainder or ex post facto Law shall be passed." Quite simply, Congress cannot impose legal consequences without a trial, nor after an event took place.
Incredibly, U.S. Rep. James Clyburn, the Democratic Majority Whip, appeared on CNBC on the morning of March 23, and justified the vote by saying that they would leave it to the courts to figure out if the measure was constitutional. He actually said: “But we will respond to the American people with our votes, and that’s what we did, responded to the American people’s anger and that emotions, we voted to tax this, knowing full well that it could end up in court and may even be consider unconstitutional.”
Not a great moment in American legislative history.
And it has to make people wonder – including business owners and investors – what this Congress is capable of doing in terms of policies impacting business and our economy.
By the way, with no bailouts in the first place, we would not be having this discussion.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
And of course, whenever government sticks its nose into something, along with it comes politics.
Last week, the U.S. House of Representatives served up politics at its most pandering. It voted by 328-93 to approve a 90% surtax on bonuses to employees earning more than $250,000 at companies that received at least $5 billion in government financial rescue dollars. The bill would set up the tax retroactively to December 31, 2008, and was generated in response to outrage over bonuses handed out at AIG, which has been one of the government’s biggest bailouts.
There are a good number of reasons to oppose this political fit by members of the House.
But one supersedes all others. It is plainly unconstitutional. Article I, Section 9 of the U.S. Constitution states: "No Bill of Attainder or ex post facto Law shall be passed." Quite simply, Congress cannot impose legal consequences without a trial, nor after an event took place.
Incredibly, U.S. Rep. James Clyburn, the Democratic Majority Whip, appeared on CNBC on the morning of March 23, and justified the vote by saying that they would leave it to the courts to figure out if the measure was constitutional. He actually said: “But we will respond to the American people with our votes, and that’s what we did, responded to the American people’s anger and that emotions, we voted to tax this, knowing full well that it could end up in court and may even be consider unconstitutional.”
Not a great moment in American legislative history.
And it has to make people wonder – including business owners and investors – what this Congress is capable of doing in terms of policies impacting business and our economy.
By the way, with no bailouts in the first place, we would not be having this discussion.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
Monday, February 23, 2009
Obama and Congress on Taxes
Just in case you were not depressed enough over the economy and bad fiscal policy, check out a Wall Street Journal article over the weekend titled “Campaign Pledges Collide With New Fiscal Rality.”
The piece focuses on where President Obama and Congress seem to be headed on some key tax issues.
On those earning at least $250,000 annually – including, of course, many entrepreneurs and investors – the President seems ready to wait until 2011 to jack up their taxes, as opposed to the advice offered by House Speaker Nancy Pelosi (D-CA) to do it earlier. Now or in 22 months? Either way, it does not bode well for the economy.
How about jacking up taxes on overseas earnings by U.S. firms, and hiking taxes on hedge fund and private equity managers? Those are in the mix, and if one is looking to hit business and investment in a down economy, these are good ways to so.
How about imposing a new tax on business to pay for the broken and costly Superfund program? Again, that’s being considered.
The only positive in the Journal’s story is that the President seems to have backed off the protectionist rhetoric he threw around during the campaign.
So, it looks like we have President Obama the big spender and tax hiker, but perhaps not the protectionist.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
The piece focuses on where President Obama and Congress seem to be headed on some key tax issues.
On those earning at least $250,000 annually – including, of course, many entrepreneurs and investors – the President seems ready to wait until 2011 to jack up their taxes, as opposed to the advice offered by House Speaker Nancy Pelosi (D-CA) to do it earlier. Now or in 22 months? Either way, it does not bode well for the economy.
How about jacking up taxes on overseas earnings by U.S. firms, and hiking taxes on hedge fund and private equity managers? Those are in the mix, and if one is looking to hit business and investment in a down economy, these are good ways to so.
How about imposing a new tax on business to pay for the broken and costly Superfund program? Again, that’s being considered.
The only positive in the Journal’s story is that the President seems to have backed off the protectionist rhetoric he threw around during the campaign.
So, it looks like we have President Obama the big spender and tax hiker, but perhaps not the protectionist.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
Thursday, January 29, 2009
More on the Economics of Hiking Tobacco Taxes
The U.S. House of Representatives approved an increase in the federal tobacco tax on January 14 by a 289-139 as part of a bill to expand the State Children’s Health Insurance Program.
While jacking up tobacco taxes to fund a health care program might sound like a good idea to some, there are many costs involved. For example, increased government involvement in health care inevitably leads to higher health care costs.
Plus, there are economic costs to increasing taxes.
Some of those costs were laid in an article by Scott Ramminger, president of the American Wholesale Marketers Association, in the January 19 Buffalo News.
Ramminger noted:
Remminger goes on to note other costs, such as increased criminal activity and hitting the pocketbooks of low and middle-incoem earners.
Can the Senate and President Obama really ignore these higher costs and lost jobs?
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
While jacking up tobacco taxes to fund a health care program might sound like a good idea to some, there are many costs involved. For example, increased government involvement in health care inevitably leads to higher health care costs.
Plus, there are economic costs to increasing taxes.
Some of those costs were laid in an article by Scott Ramminger, president of the American Wholesale Marketers Association, in the January 19 Buffalo News.
Ramminger noted:
If Congress approves a bill to expand the State Children’s Health Insurance Program (SCHIP) by significantly increasing federal cigarette and tobacco taxes, the result will be major sales reductions, massive layoffs, numerous store closings and many more robberies because of the much higher value of tobacco products…
The economic impact on the entire tobacco industry will be disastrous.
First, a 156 percent tax rate increase on cigarettes compounded by tax rate increases of up to 6,000 percent on large cigars, 2,197 percent on little cigars, 710 percent on roll-your-own tobacco, 156 percent on smokeless tobacco and 156 percent on pipe tobacco will lead to declines of 10 percent or more in retail sales of tobacco. This large reduction in sales will have a corresponding impact on industry jobs.
According to 2002 U. S. Census Bureau statistics, 1.17 million union and non-union employees are employed by tobacco manufacturers, wholesalers and retailers. With upward of a 10 percent decline in tobacco sales, industry estimates project up to 117,000 jobs will be lost.
Remminger goes on to note other costs, such as increased criminal activity and hitting the pocketbooks of low and middle-incoem earners.
Can the Senate and President Obama really ignore these higher costs and lost jobs?
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
Tuesday, January 06, 2009
Lessons from Coolidge
I am a longtime “Coolidgean.” That is, Calvin Coolidge is one of my favorite U.S. presidents.
It turns out that January 5 was the 76th anniversary of Calvin Coolidge’s death. Marking this date and looking ahead to the inauguration of our next president, Ryan L. Cole wrote an excellent piece for the American Spectator titled “Keeping Cool with Coolidge.”
The article provides an interesting contrast between Coolidge’s politics and the politics of the early 21st century, and most importantly, differences in the philosophy of governing.
Cole summed up Coolidge’s policy agenda this way: “…when asked for his thoughts on assuming the presidency, Coolidge simply replied, ‘I think I can swing it.’ And despite the opinions of New Deal historians, swing it he did. A year after Harding's death Coolidge was elected president in his own right by a landslide. He spent the next four years fulfilling his duty as he believed the founders had envisioned -- cutting taxes, resisting and vetoing new spending, and generally minding his own business while presiding over a time of great prosperity.”
That is why I am a Coolidgean.
And we desperately need some Coolidge-like common sense today.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
It turns out that January 5 was the 76th anniversary of Calvin Coolidge’s death. Marking this date and looking ahead to the inauguration of our next president, Ryan L. Cole wrote an excellent piece for the American Spectator titled “Keeping Cool with Coolidge.”
The article provides an interesting contrast between Coolidge’s politics and the politics of the early 21st century, and most importantly, differences in the philosophy of governing.
Cole summed up Coolidge’s policy agenda this way: “…when asked for his thoughts on assuming the presidency, Coolidge simply replied, ‘I think I can swing it.’ And despite the opinions of New Deal historians, swing it he did. A year after Harding's death Coolidge was elected president in his own right by a landslide. He spent the next four years fulfilling his duty as he believed the founders had envisioned -- cutting taxes, resisting and vetoing new spending, and generally minding his own business while presiding over a time of great prosperity.”
That is why I am a Coolidgean.
And we desperately need some Coolidge-like common sense today.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
Tuesday, November 25, 2008
What NOT To Do on the Economy, Courtesy of the UK
As I paged through The Wall Street Journal this morning, I came across a headline declaring, “U.K. to Cut Taxes, Speed Spending in Stimulus Plan.”
Well, I thought, maybe the Brits got it half right. Unfortunately, even half right was not the case.
The Journal reported:
Let’s take these one at a time.
First, a temporary cut in the VAT – a very ugly and dangerous tax – is better than nothing. But that’s about all that can be said. Temporary tax cuts do little since, by definition, a tax increase must follow.
Second, more government infrastructure spending is not the way economies grow. Infrastructure follows economic growth; it does not lead economic growth. If government infrastructure spending were the answer, then government should just keep pouring concrete wherever possible. In reality, government projects raise questions about waste and overruns, politics allocating resources rather than markets, and lost opportunities as resources are sucked away from the private sector.
Third, government bailouts of bad debt and bad decisions hurt the economy and taxpayers no matter who made the bad decisions – from small business to the largest firms.
Fourth, and this is the worst idea put forth, the British government has put an income tax hike in the mix, raising the top tax rate – which will hit many entrepreneurs and investors – from 40% to 45%.
So, while the British government wants to revitalize its economy, they are attempting to do so by offering temporary tax cuts that do nothing to boost incentives for productive economic activity, more wasteful government spending and bailouts, and higher taxes on those who have the resources to invest in and build businesses. It should be obvious that this will not work.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
Well, I thought, maybe the Brits got it half right. Unfortunately, even half right was not the case.
The Journal reported:
The British government will boost spending and slash taxes in a £20 billion ($29.73 billion) stimulus package announced Monday, an effort to cushion the impact of what is shaping up to be a deep recession.
In a speech to present his budget plans for the coming year, Treasury chief Alistair Darling laid out measures including a yearlong cut in value-added tax to 15% from 17.5%, an extension of tax breaks for low-wage workers, the acceleration of £3 billion in spending on infrastructure projects, and debt guarantees for small businesses.
To help pay for the stimulus, he said, the government will raise the top income-tax rate to 45% from 40% after the next election, which must be called by the summer of 2010. The increase will be the first for the British income tax since 1974.
Let’s take these one at a time.
First, a temporary cut in the VAT – a very ugly and dangerous tax – is better than nothing. But that’s about all that can be said. Temporary tax cuts do little since, by definition, a tax increase must follow.
Second, more government infrastructure spending is not the way economies grow. Infrastructure follows economic growth; it does not lead economic growth. If government infrastructure spending were the answer, then government should just keep pouring concrete wherever possible. In reality, government projects raise questions about waste and overruns, politics allocating resources rather than markets, and lost opportunities as resources are sucked away from the private sector.
Third, government bailouts of bad debt and bad decisions hurt the economy and taxpayers no matter who made the bad decisions – from small business to the largest firms.
Fourth, and this is the worst idea put forth, the British government has put an income tax hike in the mix, raising the top tax rate – which will hit many entrepreneurs and investors – from 40% to 45%.
So, while the British government wants to revitalize its economy, they are attempting to do so by offering temporary tax cuts that do nothing to boost incentives for productive economic activity, more wasteful government spending and bailouts, and higher taxes on those who have the resources to invest in and build businesses. It should be obvious that this will not work.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
Tuesday, November 11, 2008
Solution for Bad Economy – Raise Taxes?
On the campaign trail, President-elect Barack Obama, a Democrat, proposed raising taxes on upper-income earners – which naturally includes many small business owners and investors.
But in such a bad economy, will an Obama administration actually carry through on such a measure?
Well, the November 8 New York Daily News reported the following:
If that is the case, those tax increases – including higher personal income, capital gains and dividend tax rates – would serve as another drag on the economy. Indeed, entrepreneurs and investors are in a holding pattern waiting to see what will happen in a wide array of policy areas, including taxes. The question is: Just how much will the costs of starting up, building and investing in a business rise?
The economy certainly will suffer if taxes are increased on upper-income earners who have the resources to invest and take risks, or if the possibility of increased taxes continues to loom in the near future.
If we're serious about getting the economy back on track, then entrepreneurs, businesses and investors not only need the assurance that taxes are not going up, but that broad-based, permanent, substantive, pro-growth tax relief is on the way.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
But in such a bad economy, will an Obama administration actually carry through on such a measure?
Well, the November 8 New York Daily News reported the following:
Despite speculation to the contrary, President-elect Barack Obama will act on his campaign promise and roll back the Bush administration's tax cuts for the wealthiest Americans, an Obama senior adviser told The Daily News.
The Obama camp rejected the overnight analysis by some pundits who speculated the language at his first news conference Friday suggested the President-elect was backing away from his tax plans.
"No change to the tax plan - at all," the aide said.
If that is the case, those tax increases – including higher personal income, capital gains and dividend tax rates – would serve as another drag on the economy. Indeed, entrepreneurs and investors are in a holding pattern waiting to see what will happen in a wide array of policy areas, including taxes. The question is: Just how much will the costs of starting up, building and investing in a business rise?
The economy certainly will suffer if taxes are increased on upper-income earners who have the resources to invest and take risks, or if the possibility of increased taxes continues to loom in the near future.
If we're serious about getting the economy back on track, then entrepreneurs, businesses and investors not only need the assurance that taxes are not going up, but that broad-based, permanent, substantive, pro-growth tax relief is on the way.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
Friday, October 31, 2008
A Governor Says “No” to Government Bailouts and Stimulus
In this new era of taxpayer bailouts, everybody seems to be heading to Washington for handouts. Well, almost everyone.
It was not surprising to see New York Governor David Paterson on Capitol Hill looking for federal dollars given that New York State reportedly faces a four-year projected budget shortfall of $47 billion.
According to an Associated Press story, Paterson said: “Just like the financial services industry, we need a partner in the federal government in order to help stave off an impending financial calamity and stabilize our fiscal condition.”
A partner – how nice.
Of course, New York State elected officials have pushed government spending relentlessly higher, while also taxing and regulating individuals and businesses to death. Why exactly should federal taxpayers be forced to bailout such economic incompetence?
What was surprising, however, was what South Carolina Governor Mark Sanford had to say to Congress. According to AP:
A moment of economic clarity on Capital Hill from the governor of South Carolina. A big thanks to Governor Sanford.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
It was not surprising to see New York Governor David Paterson on Capitol Hill looking for federal dollars given that New York State reportedly faces a four-year projected budget shortfall of $47 billion.
According to an Associated Press story, Paterson said: “Just like the financial services industry, we need a partner in the federal government in order to help stave off an impending financial calamity and stabilize our fiscal condition.”
A partner – how nice.
Of course, New York State elected officials have pushed government spending relentlessly higher, while also taxing and regulating individuals and businesses to death. Why exactly should federal taxpayers be forced to bailout such economic incompetence?
What was surprising, however, was what South Carolina Governor Mark Sanford had to say to Congress. According to AP:
Sanford, a South Carolina Republican who was also appearing before the committee, contended they should not pass another stimulus package because it will not fix the economic problems but drive the country deeper into debt.
"I'm here to beg of you not to approve or advance the contemplated $150 billion stimulus package," Sanford said. "This $150 billion salve may in fact further infect our economy with unnecessary government influence and unintended fiscal consequences."
By Sanford's count, the federal government has already pumped $2 trillion into the economy this year through a previous stimulus package, the financial services bailout, and rescue actions for specific firms.
A moment of economic clarity on Capital Hill from the governor of South Carolina. A big thanks to Governor Sanford.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
Wednesday, October 29, 2008
Sowell on Obama’s Tax Hikes
Thomas Sowell is an intelligent and insightful economist. Each of his columns communicates worthwhile bits of economic wisdom.
Check out the latest titled “Taxing Times” as it appears at National Review Online. The article addresses the potential ills if Senator Obama wins the White House, and goes ahead with the tax agenda he has been touting on the campaign trail.
The entire column should be read, but let’s note a few points from Sowell right here:
Like I said: intelligent and insightful.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
Check out the latest titled “Taxing Times” as it appears at National Review Online. The article addresses the potential ills if Senator Obama wins the White House, and goes ahead with the tax agenda he has been touting on the campaign trail.
The entire column should be read, but let’s note a few points from Sowell right here:
• Those who are receptive to Senator Barack Obama’s plan to increase taxes on “the rich” seem not to understand that the issue is the nation’s loss of wealth. Today, wealth can leave the country when heavy taxes threaten it — instantly, in an age of electronic financial transfers — and create jobs and economic growth overseas, instead of at home.
• Jack up the capital-gains tax rate in the U.S. and more Americans can be expected to send their capital elsewhere. That means sending jobs elsewhere, so that even people with no capital to invest lose employment opportunities. Economists have trouble determining how many people are affected by a tax increase because those affected extend far beyond those who write the checks to pay the government. Taxes on businesses can get passed along to consumers, in whole or in part, even though it is only the business that writes the check to the government.
• The idea that you can single out one segment of society to be taxed or mandated, for the benefit of the rest of society, is reminiscent of a San Francisco automobile dealer’s sign: “We cheat the other guy and pass the savings on to you.”
Like I said: intelligent and insightful.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
Monday, September 08, 2008
Stadium Business
Two things irritated me about the Indianapolis Colts during the season premiere of NBC’s Sunday Night Football on September 7.
First, since I’m a Minnesota Vikings fan, the Colts managed to lose to our division rival the Chicago Bears by a score of 29-13. Thanks a lot Peyton Manning and Company.
Second, there’s the matter of the Colts new home. The Bears-Colts game marked the official opening of Lucas Oil Stadium. From what I could see on television and in a variety of online photos, it looks like a wonderful facility.
That is, except for the fact that the taxpayers were sacked to build it. That irritates me as an economist.
Teams, government officials, and even many in the business community like to proclaim that new stadiums boost regional economies in order to justify all kinds of taxpayer handouts for such projects. That’s been no different with the Colts new venue.
For example, an article on the Website of WISH-TV opened: “Taxpayers are footing most of the bill for the new stadium, but city and state leaders promise financial blessings will rain down on expectant Hoosiers.” The piece went on to quote various people making all kinds of promises about how the stadium will be an economic plus, including, of course, citing the obligatory study from a hired-gun firm supposedly showing these benefits.
In reality, though, every legitimate, independent study of stadium economics makes clear that these facilities have no effect on jobs, income and growth in local economies. Indeed, some analyses point to a negative impact.
An August 9 article in the Indianapolis Business Journal serves up some of the typical assertions justifying subsidies for new stadiums, but also raises points about this $720 million stadium that should raise questions about sports subsidies in general, including:
As is clear form these points, the Colts got a sweetheart deal, and the taxpayers got stuck with the tab, including hotel, rental car and food and beverage businesses. And both businesses and individuals will not reap any great rewards in terms of the economy.
Is there economic value in new stadiums? Sure. But it must be left up to the private sector to decide what that value is. So, just like other businesses, let the team owners finance and build their own sports facilities.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
First, since I’m a Minnesota Vikings fan, the Colts managed to lose to our division rival the Chicago Bears by a score of 29-13. Thanks a lot Peyton Manning and Company.
Second, there’s the matter of the Colts new home. The Bears-Colts game marked the official opening of Lucas Oil Stadium. From what I could see on television and in a variety of online photos, it looks like a wonderful facility.
That is, except for the fact that the taxpayers were sacked to build it. That irritates me as an economist.
Teams, government officials, and even many in the business community like to proclaim that new stadiums boost regional economies in order to justify all kinds of taxpayer handouts for such projects. That’s been no different with the Colts new venue.
For example, an article on the Website of WISH-TV opened: “Taxpayers are footing most of the bill for the new stadium, but city and state leaders promise financial blessings will rain down on expectant Hoosiers.” The piece went on to quote various people making all kinds of promises about how the stadium will be an economic plus, including, of course, citing the obligatory study from a hired-gun firm supposedly showing these benefits.
In reality, though, every legitimate, independent study of stadium economics makes clear that these facilities have no effect on jobs, income and growth in local economies. Indeed, some analyses point to a negative impact.
An August 9 article in the Indianapolis Business Journal serves up some of the typical assertions justifying subsidies for new stadiums, but also raises points about this $720 million stadium that should raise questions about sports subsidies in general, including:
• [T]he hard work is only beginning for the city’s Capital Improvement Board, the entity charged with operating the stadium.
The fumbling point: CIB is anticipating a $20 million operating deficit for Lucas Oil Stadium in 2009. Anticipated expenses are $27.7 million—far outstripping the $7.7 million CIB expects to collect from its share of revenue from stadium events.
• Attracting events beyond Indianapolis Colts games to the stadium is crucial because the team gets all revenue derived from its games. CIB and the Colts each get about half of revenue from other events.
• For 2008, the board has an overall budget of $108 million, with $34 million earmarked for debt payments on construction of Conseco Fieldhouse, the RCA Dome and an earlier convention center expansion.
About $60 million of the board’s revenue comes from taxes, including portions of local hotel, car rental, cigarette, and food and beverage taxes.
Grand said he didn’t think the board would need to tap taxpayers for any additional money to cover operating expenses “at this point,” adding that the CIB traditionally has operated “pretty efficiently.”
• CIB isn’t on the hook for the largest expense—the bonds issued to pay for construction.
Under a deal brokered with Gov. Mitch Daniels in 2005, that responsibility fell to the state. The Indiana Finance Authority is handling the bond issues, and the newly created Indiana Stadium and Convention Building Authority is overseeing construction. The state also took responsibility for making the $40 million payment the Colts received for terminating their RCA Dome lease.
The final tab for the project is expected to be $720 million—that’s $5 million more than the initial $625 million budget and its $90 million contingency fund.
• To cover stadium construction, the Indiana Finance Authority sold $666 million in bonds, and it soon will sell bonds to cover the convention center project. Bonds will be repaid from a bevy of new taxes, including increases to the Marion County hotel, car rental and admission taxes, and a regional tax on food and beverage sales.
As is clear form these points, the Colts got a sweetheart deal, and the taxpayers got stuck with the tab, including hotel, rental car and food and beverage businesses. And both businesses and individuals will not reap any great rewards in terms of the economy.
Is there economic value in new stadiums? Sure. But it must be left up to the private sector to decide what that value is. So, just like other businesses, let the team owners finance and build their own sports facilities.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
Thursday, August 28, 2008
A Most Worthy Pledge by California Lawmakers
Many politicians don’t like to take clear stands. So, when a large group does just that, it’s well worth noting. And when that pledge is a positive one for the economy and taxpayers – including small businesses – it warrants appreciation and praise.
That is the case with every Republican state lawmaker – except one – in the state of California.
Consider the following from an August 28 article in the Sacramento Bee:
Too bad Republican Governor Arnold Schwarzenegger hasn’t made the same pledge. As reported by the Sacrament Bee: “Republican Gov. Arnold Schwarzenegger, who has not signed the tax pledge, rocked GOP ranks this month by proposing a 1-cent sales tax increase for three years, which then would drop permanently to a quarter-cent below the current rate. Norquist said the proposal, touted by supporters as a long-term cut, would violate the anti-tax pledge because its goal is to create an immediate increase of $4 billion in state revenues. ‘Nobody believes for 30 seconds that the tax cut really happens,’ he said.”
Norquist, of course, is absolutely correct.
When states fall into budget messes, the source of the problem must be identified in order to find the proper remedy. In California, it’s long been about too much spending. It has nothing to do with too little revenue. Raising taxes will only make California’s already hostile tax and regulatory climate only worse. At one time, Governor Schwarzenegger seemed to understand this fiscal fact.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
That is the case with every Republican state lawmaker – except one – in the state of California.
Consider the following from an August 28 article in the Sacramento Bee:
Don't read their lips when California's Republican lawmakers say 'no new taxes' – they've put it in writing, signed their names, essentially inviting their own party to oust them if they renege.
Every GOP lawmaker except Fair Oaks Assemblyman Roger Niello has signed the "Taxpayer Protection Pledge" this year, casting a shadow on budget talks by making any vote to raise taxes a potential career killer.
"If you break the pledge, the people who voted for you will say, 'Excuse me, not only did you raise my taxes but you lied to me,' " said Grover Norquist, president of Americans for Tax Reform, in Washington, D.C., which conducts the pledge drive nationwide.
The tax pledge, whose signers are publicized on the group's Web site, is a written promise to voters that "I will oppose and vote against any and all efforts to increase taxes."
Too bad Republican Governor Arnold Schwarzenegger hasn’t made the same pledge. As reported by the Sacrament Bee: “Republican Gov. Arnold Schwarzenegger, who has not signed the tax pledge, rocked GOP ranks this month by proposing a 1-cent sales tax increase for three years, which then would drop permanently to a quarter-cent below the current rate. Norquist said the proposal, touted by supporters as a long-term cut, would violate the anti-tax pledge because its goal is to create an immediate increase of $4 billion in state revenues. ‘Nobody believes for 30 seconds that the tax cut really happens,’ he said.”
Norquist, of course, is absolutely correct.
When states fall into budget messes, the source of the problem must be identified in order to find the proper remedy. In California, it’s long been about too much spending. It has nothing to do with too little revenue. Raising taxes will only make California’s already hostile tax and regulatory climate only worse. At one time, Governor Schwarzenegger seemed to understand this fiscal fact.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
Friday, August 15, 2008
SBE Council Chief Economist on Obama Tax Plan
Today, Raymond J. Keating, chief economist for the Small Business & Entrepreneurship Council (SBE Council), issued the following statement regarding the tax plan details released by the campaign of U.S. Senator Barack Obama, the presumptive Democratic Party presidential nominee:
“Senator Obama likes to talk about change. Unfortunately, his tax plan reflects the kind of old and tired class warfare thinking we’ve heard too many times in the past.
“Obama would jack up the two highest personal income tax rates, hike capital gains and dividend tax rates, increase Social Security payroll taxes on upper-income earners, and maintain a death tax with a top rate of 45 percent. Obviously, these measures would raise the costs of working, investing and entrepreneurship.
“Ironically, Obama’s plan and his economic advisers say his tax plan would benefit small business. But it should be obvious that raising the costs of work and investment are not positives for small business. For good measure, higher personal income tax rates directly hit the bottom line of small businesses.
“Data released earlier this year by the Treasury Department noted that 74 percent of taxpayers benefiting from the reduction earlier this decade in the top personal income tax rate are entrepreneurs with pass-through businesses (such as sole proprietorship, partnership, and S-Corps), and 70 percent of those reaping rewards from reductions in the top two tax rates own small businesses. So, these Obama tax increases would hit small businesses hard, with fallout coming in the form of restrained economic growth and job creation.
“In the end, class warfare tax policy is all about using envy to political advantage. Envy never makes for sound economic policy.”
Wednesday, July 02, 2008
Taxation Without Representation … Again!
Think it’s costly to fly on a plane or run an airline today? Well, new reports late last week made clear that it could get even pricier when flying to or from Europe.
On June 27, a New York Times report noted that the European Union reached an agreement to force airlines – including U.S. airlines – using European Union airports “to buy pollution credits beginning in 2012,” joining other industries in Europe’s emissions regulatory scheme. Here’s a particularly scary line from the report: “Including airlines in the system is the boldest move yet by Europe to stamp its environmental policies on the rest of the world.”
Airlines, of course, already are struggling under high fuel prices, and are passing along surcharges on consumers. This measure would only raise costs further.
The Times article noted that the European Parliament and individual nations must still approve the measure, but these are expected to be mere formalities. More substantively:
One estimate put the cost of this plan at $4 billion. That’s a massive tax on consumers and airlines, including U.S.-based companies.
Hey, wait a minute. July Fourth provides a reminder. Haven’t we been down this path before with Europe? Yes, it was called “taxation without representation.”
Let’s hope Mr. Gianfranceschi is correct, and that these taxes never become reality. Let’s also hope that tax friendly politicians in America don’t try to do something similar in their zealous crusade against carbon emissions.
On June 27, a New York Times report noted that the European Union reached an agreement to force airlines – including U.S. airlines – using European Union airports “to buy pollution credits beginning in 2012,” joining other industries in Europe’s emissions regulatory scheme. Here’s a particularly scary line from the report: “Including airlines in the system is the boldest move yet by Europe to stamp its environmental policies on the rest of the world.”
Airlines, of course, already are struggling under high fuel prices, and are passing along surcharges on consumers. This measure would only raise costs further.
The Times article noted that the European Parliament and individual nations must still approve the measure, but these are expected to be mere formalities. More substantively:
American officials warned that the requirements probably would be illegal under the convention governing international civil aviation. “The mandatory application of the European Emissions Trading System to U.S. airlines and airlines of other non-European countries is, we think, both contrary to international law and ultimately unworkable,” said Robert Gianfranceschi, a spokesman at the United States Mission to the European Union in Brussels.
One estimate put the cost of this plan at $4 billion. That’s a massive tax on consumers and airlines, including U.S.-based companies.
Hey, wait a minute. July Fourth provides a reminder. Haven’t we been down this path before with Europe? Yes, it was called “taxation without representation.”
Let’s hope Mr. Gianfranceschi is correct, and that these taxes never become reality. Let’s also hope that tax friendly politicians in America don’t try to do something similar in their zealous crusade against carbon emissions.
Tuesday, May 13, 2008
Entrepreneurs and Government in Space
Space the final private sector or governmental frontier?
After watching NASA’s cost overruns for decades, the idea of the private sector heading into space has been quite intriguing. Entrepreneur Richard Branson, for example, has started up Virgin Galactic, which is focused on space tourism.
Unfortunately, though, even private space ventures cannot completely disengage from reliance on the taxpayers.
Consider the following from a Washington Post article titled “New Mexico Moves Ahead on Spaceport” on May 10:
Excuse me, but was that New Mexico’s Space Authority? And voters gave thumbs up to a sales tax hike to build a spaceport? And apparently, other states and nations are working to get in on the spaceport act.
The ideas of space tourism and perhaps the private sector even venturing further into space are both fantastic and exciting. But there is absolutely no reason why the taxpayers should be subsidizing such entrepreneurial dreams. Let entrepreneurs and investors risk their own resources, not the taxpayers’ money, in building spaceports.
After watching NASA’s cost overruns for decades, the idea of the private sector heading into space has been quite intriguing. Entrepreneur Richard Branson, for example, has started up Virgin Galactic, which is focused on space tourism.
Unfortunately, though, even private space ventures cannot completely disengage from reliance on the taxpayers.
Consider the following from a Washington Post article titled “New Mexico Moves Ahead on Spaceport” on May 10:
Many hurdles remain -- including environmental approvals and certifying the space-worthiness of Virgin Galactic's radical White Knight Two and SpaceShipTwo -- but the project got a major boost last month when voters in a second New Mexico county approved a sales tax increase to help pay for the spaceport. New Mexico officials are gleeful that they were able to persuade residents of Sierra County, a large and sparsely populated area with an average age of 55, to vote 2 to 1 for the tax increase.
"The space business is a very, very difficult one, and you never know what lies ahead," said Kelly O'Donnell, chair of New Mexico's Spaceport Authority, which was conceived in 1990. "But we're moving ahead just as we hoped." …
O'Donnell said that once the federal government grants the permits, construction can begin quickly, because the authority has the $200 million it needs from the state and county governments.
Excuse me, but was that New Mexico’s Space Authority? And voters gave thumbs up to a sales tax hike to build a spaceport? And apparently, other states and nations are working to get in on the spaceport act.
The ideas of space tourism and perhaps the private sector even venturing further into space are both fantastic and exciting. But there is absolutely no reason why the taxpayers should be subsidizing such entrepreneurial dreams. Let entrepreneurs and investors risk their own resources, not the taxpayers’ money, in building spaceports.
Monday, May 12, 2008
Tax Haven Debate
High tax countries – and the umbrella groups that represent them – do not like low-tax nations.
After all, it is sooo inconvenient that people might want to keep more of their own money, rather than handing over big chunks of their earnings to wasteful politicians, and that some nation’s recognize this fact. This is really irritating as it tends to act as a restraint on how high tax rates can go. Man, talk about bumming out politicians!
Groups like the OECD, of course, have scolded low-tax countries – calling them “uncooperative tax havens.”
The online edition of the Wall Street Journal recently featured a debate on the topic of tax havens between the Cato Institute’s Dan Mitchell and Raymond Baker at the Brookings Institution.
Check it out. It’s well worth reading.
For anyone thinking clearly about the economics of the issue, Mitchell wins this exchange hands down. Here’s one point made by Mitchell that perhaps U.S. politicians should take note of when they start flirting with the idea of global tax harmonization and trying to punish certain tax havens:
After all, it is sooo inconvenient that people might want to keep more of their own money, rather than handing over big chunks of their earnings to wasteful politicians, and that some nation’s recognize this fact. This is really irritating as it tends to act as a restraint on how high tax rates can go. Man, talk about bumming out politicians!
Groups like the OECD, of course, have scolded low-tax countries – calling them “uncooperative tax havens.”
The online edition of the Wall Street Journal recently featured a debate on the topic of tax havens between the Cato Institute’s Dan Mitchell and Raymond Baker at the Brookings Institution.
Check it out. It’s well worth reading.
For anyone thinking clearly about the economics of the issue, Mitchell wins this exchange hands down. Here’s one point made by Mitchell that perhaps U.S. politicians should take note of when they start flirting with the idea of global tax harmonization and trying to punish certain tax havens:
Efforts by bureaucracies such as the OECD to create a tax cartel -- an "OPEC for politicians" -- should be rejected. Such policies would be a threat to the U.S. economy. Foreigners have more than $12 trillion invested in America in part because we also are a tax haven. Foreigners generally don't have to pay tax on interest and capital gains, and the IRS generally doesn't collect information on those payments, so there is no information to share with foreign tax collectors. Moreover, states such as Delaware have incorporation rules that are popular for foreigners seeking to protect themselves from confiscatory taxation in their home countries.
Wednesday, May 07, 2008
More Bad Tax News from New York
New York serves as a reliable source for bad news regarding government run amok.
Late last month, state legislators and Governor David Paterson jacked up the state’s cigarette tax by 83 percent – from $1.50 per pack to $2.75. By the way, New York City adds its own tax of $1.50. That’s a total per pack cigarette tax in New York City of $4.25.
That’s a big economic hit for consumers and small businesses. But the bad news doesn’t stop there.
As Patrick Fleenor reports in a May 7 Wall Street Journal op-ed, New York has long been out front in jacking up tobacco taxes. The result has been a boon for the bad guys. The only thing that has changed lately is who the bad guys are.
Consider the following written by Fleenor:
Not only do lawmakers fail to grasp or choose to ignore the negative economics of their taxing policies, but they fail to consider even more grave consequences.
Late last month, state legislators and Governor David Paterson jacked up the state’s cigarette tax by 83 percent – from $1.50 per pack to $2.75. By the way, New York City adds its own tax of $1.50. That’s a total per pack cigarette tax in New York City of $4.25.
That’s a big economic hit for consumers and small businesses. But the bad news doesn’t stop there.
As Patrick Fleenor reports in a May 7 Wall Street Journal op-ed, New York has long been out front in jacking up tobacco taxes. The result has been a boon for the bad guys. The only thing that has changed lately is who the bad guys are.
Consider the following written by Fleenor:
As the Bureau of Alcohol, Tobacco and Firearms said in September 2002 of New York's cigarette smuggling, "Traditional organized crime is involved, terrorist groups are involved, and street gangs are involved." Rivalry among these groups has resulted in numerous shootings and homicides.
The connection to terrorism is no exaggeration. When New York police cracked another smuggling ring in 2005, they uncovered a multimillion dollar flow of funds from New York City to unknown individuals in the Middle East. Police Commissioner Raymond Kelly gave voice to the obvious conclusion: Terrorists probably got the money.
Just a few weeks before that 2005 bust, Buffalo-area businessman Aref Ahmed had been sentenced to three years and a month for cigarette smuggling. The feds said he'd used the racket to fund "scholarships" at terrorist training camps in Afghanistan during the spring of 2001. Going back to 1993, counterfeit cigarette stamps were found in the apartment of the first World Trade Center bombers….
In the 1960s and '70s, organized crime exploited high cigarette taxes at our expense. Today we face an even deadlier adversary.
Not only do lawmakers fail to grasp or choose to ignore the negative economics of their taxing policies, but they fail to consider even more grave consequences.
Tuesday, May 06, 2008
Raise the Gas Tax by a Buck!?
There’s a debate on the presidential campaign trail right now about whether it makes sense or not to provide a federal gas tax holiday during the summer driving season.
But in a recent story, National Public Radio’s economic correspondent Chris Farrell went in a completely different direction. He suggested jacking up the federal gas tax by a buck.
Farrell believes that “will send an important signal to the market for research and development into alternative energy.” He acknowledged that the market already is sending signals without a gas tax increase, but this would “say energy prices or gasoline prices are going to stay high.”
And this is a good idea?
In reality, dramatically increasing the federal gas tax has nothing to do with market signals. By definition, a tax increase is not a market signal. Instead, it’s about government, at the behest of various special interests, pushing consumers, businesses and the economy around to their own liking.
And wouldn’t this tax hike be regressive – hitting lower incomes harder? Well, yes, Farrell acknowledged. But other taxes could be cut to compensate, he said. Yeah, right, like that would happen.
In the end, the only thing that a major gas tax increase would guarantee is higher prices at the pump, which would hit consumers, small businesses and the economy hard, and provide more money for members of Congress to waste on pork projects.
That’s just dumb economics.
But in a recent story, National Public Radio’s economic correspondent Chris Farrell went in a completely different direction. He suggested jacking up the federal gas tax by a buck.
Farrell believes that “will send an important signal to the market for research and development into alternative energy.” He acknowledged that the market already is sending signals without a gas tax increase, but this would “say energy prices or gasoline prices are going to stay high.”
And this is a good idea?
In reality, dramatically increasing the federal gas tax has nothing to do with market signals. By definition, a tax increase is not a market signal. Instead, it’s about government, at the behest of various special interests, pushing consumers, businesses and the economy around to their own liking.
And wouldn’t this tax hike be regressive – hitting lower incomes harder? Well, yes, Farrell acknowledged. But other taxes could be cut to compensate, he said. Yeah, right, like that would happen.
In the end, the only thing that a major gas tax increase would guarantee is higher prices at the pump, which would hit consumers, small businesses and the economy hard, and provide more money for members of Congress to waste on pork projects.
That’s just dumb economics.
Friday, April 18, 2008
Flat Tax vs. Sales Tax: A Win-Win Debate
There’s a new video narrated by economist Dan Mitchell for the Center for Freedom and Prosperity. It’s called “Flat Tax vs. National Sales Tax.”
Mitchell briefly describes the woes of the current tax system, shows why either a flat tax or a national sales tax would be better, and then offers an intriguing idea on how to unify reformers on both sides of the flat-tax-vs.-sales-tax debate.
It’s well worth watching.
Mitchell briefly describes the woes of the current tax system, shows why either a flat tax or a national sales tax would be better, and then offers an intriguing idea on how to unify reformers on both sides of the flat-tax-vs.-sales-tax debate.
It’s well worth watching.
Wednesday, April 16, 2008
Florida’s Tax Possibilities
On SBE Council’s “Business Tax Index 2008,” Florida’s tax system ranks an excellent fifth in the nation. That is, it is fifth best in terms of tax costs imposed on entrepreneurship and small business.
Florida benefits most from no personal income and individual capital gains taxes. In addition, its unemployment tax is low. Of course, there are some negatives as well, including high fuel taxes.
Besides, when it comes to taxes, there’s always room for improvement. Two major tax issues were being considered for the November ballot. One measure would have placed a Taxpayers Bill of Rights, or TABOR, on the ballot limiting government revenue growth to population and inflation. The second would present at least a partial tax shift, eliminating school property taxes in favor of reduced spending and expanded consumption taxes.
The Orlando Sentinel reported the following on April 15:
TABOR makes sense, but unfortunately will not be on the ballot. Meanwhile, the property tax measure offers a fascinating opportunity to debate the plusses and minuses of taxing property versus taxing consumption.
Florida benefits most from no personal income and individual capital gains taxes. In addition, its unemployment tax is low. Of course, there are some negatives as well, including high fuel taxes.
Besides, when it comes to taxes, there’s always room for improvement. Two major tax issues were being considered for the November ballot. One measure would have placed a Taxpayers Bill of Rights, or TABOR, on the ballot limiting government revenue growth to population and inflation. The second would present at least a partial tax shift, eliminating school property taxes in favor of reduced spending and expanded consumption taxes.
The Orlando Sentinel reported the following on April 15:
A powerful tax-reform panel couldn't muster the two-thirds majority needed to place the "Taxpayers Bill of Rights," or TABOR, on the November ballot. TABOR links the revenue growth of state and local governments to population and inflation. The Taxation and Budget Reform Commission spent nearly five hours debating and tweaking the plan Monday. Finally, a weakened version that only would have required a super-majority vote for local governments to raise taxes failed 14-9. The amendment needed 17 votes on the 25-member panel…
Meanwhile, trouble was mounting for an amendment that has already passed the panel. It eliminates about $9.5 billion in property taxes that now finance schools and requires the Legislature to make up the money through spending cuts, a penny sales-tax increase and an end to tax exemptions on goods and services.
But at least one commissioner who voted to pass the so-called tax swap last month said Monday he has changed his mind. Duval County tax collector Mike Hogan, who was part of the 21-vote majority for the measure, said he had thought it meant lawmakers would be free to use a 2- or 3-cent sales-tax increase. The commission's Style and Drafting committee has since "clarified" the plan, which mandates that lawmakers couldn't raise the sales tax by more than a penny.
Hogan said that would mean lawmakers would have to impose a sales tax on services — everything from lawn care and dry cleaning to lawyers' and accountants' bills — to generate enough money. "There's no question I'm changing my vote," Hogan said. "It forces a tax on services."
TABOR makes sense, but unfortunately will not be on the ballot. Meanwhile, the property tax measure offers a fascinating opportunity to debate the plusses and minuses of taxing property versus taxing consumption.
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