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On Wednesday, December 13th, TPA’s Executive Director Patrick Hedger joined dozens of other protestors outside an event where Virginia Governor Glenn Youngkin (R) and other elected officials announced the framework of a taxpayer-funded stadium for the Washington Wizards and Capitals in the Northern Virginia city of Alexandria. Patrick, an impacted Virginia taxpayer himself, spoke to several newspaper, radio, and television reporters on the scene and offered a counter-narrative to the lofty promises of Governor Youngkin and billionaire Wizards and Capitals owner Ted Leonsis. The economic literature on stadium subsidies is virtually unanimous across decades of research and hundreds of studies: they are unequivocal losers for taxpayers. The details of the proposed framework are scarce, but it seems Virginia taxpayers will be asked to back bonds to build the multi-billion dollar complex that the teams will then lease. Such a deal resembles the one that left St. Louis taxpayers making payments on an empty stadium when the Rams skipped town back to Los Angeles. There is no doubt Leonsis and his teams will continue to play Virginia, Maryland, and the District of Columbia off of one another to extract more and more from taxpayers by threatening to relocate before the end of this agreement. It’s a shame for Virginia taxpayers Governor Youngkin has fallen for this all-too-common trick.
Tax Reform Turns Six Years Old
This month marks the sixth anniversary of the passage and enactment of the Tax Cuts and Jobs Act (TCJA). The law was the first major reform to the bloated federal tax code in more than a generation. It delivered meaningful tax reductions to individuals, families, and businesses large and small. Together with deregulation, the 2017 tax reform law helped usher in unprecedented economic growth and prosperity for the American people. Thanks to the commitment of former lawmakers like House Ways and Means Chairman Kevin Brady (R-Texas) and Senate Finance Chairman Orrin Hatch (R-Utah) to a fairer and easier tax system, taxpayers everywhere are better off. Now, with Jason Smith (R-Mo.) holding the gavel of the House tax-writing committee, it’s time to double down and pass new tax cuts when Congress comes back in January 2024.
Looking Back on What Was Accomplished
The law was a particularly huge win for the working and middle classes throughout America. It delivered lower individual tax rates across the board, nearly doubled the standard deduction to $12,000 for individuals and $24,000 for married couples, and doubled the Child Tax Credit to $2,000 per child. It also helped to streamline numerous credits and deductions to make the code less burdensome and taxes easier to file. Taken together, the individual-side provisions have returned much money back to the pockets to more hardworking taxpayers. According to our friends at the Tax Foundation, 80 percent of all filers have seen a lower tax liability than they otherwise would have had the TCJA not been enacted. These changes to individual rates are also good for small businesses nationwide, as they pay tax through the individual income tax code rather than the corporate tax code. In addition to the lower rates, small businesses also see tax relief through the creation of a 20 percent deduction for businesses organized as pass-through entities. These provisions have helped them retain and hire workers, invest in capital-intensive equipment, and expand their services. Unfortunately, unless Congress acts to make permanent these individual-side and small-business tax provisions, filers will be hit with a massive tax increase beginning in tax year 2026. For businesses, the TCJA permanently lowered the corporate tax rate to 21 percent down from 35 percent, which was the highest among OECD countries. It also allowed businesses to immediately deduct most new domestic investments (but more on that below). Importantly, these pro-growth changes have helped American businesses better compete with foreign countries such as China, India, and Mexico.
The TCJA was Foundational but Flawed
While the TCJA was historic, it was not perfect. In addition to the individual-side provisions being temporary and needing Congressional action before they expire, there are several business-side provisions that need reform. The first is the Research & Development Tax Credit. For decades, businesses were allowed to deduct certain R&D expenses straight away to reduce their taxable income. But per to the TCJA, R&D expenses must be amortized over a five-year period (beginning in 2022). The change brings great harm to innovators, manufacturers, and all businesses that for more than 70 years relied on the immediate deductibility of their R&D costs. If Congress does not fix this short-sighted mistake, hundreds of thousands of jobs could be put at risk. At a macro level, the United States is a global leader in innovation, and we risk dulling our sharp competitive edge through inaction. Congress should also pursue making bonus depreciation permanent. One of the most significant provisions of the TCJA allowed businesses to fully and immediately expense their capital investments through 2022. Since the start of 2023, full expensing provisions began phasing out over five years. When businesses can quickly recover the costs of their investments that are eligible for bonus depreciation, they invest more in those assets. By 2027, there will be no depreciation bonus at all for any business. Finally, Congress should restore full 163(j) interest deductibility. Prior to 2022, business-interest expense deductions were limited by section 163(j) to 30 percent of their earnings before interest, tax, depreciation, and amortization. They are now limited to 30 percent of earnings before interest and tax only – not depreciation or amortization. According to some in the business community, this new standard, “acts as a tax on investment, making it more expensive for capital-intensive companies throughout the supply chain to finance job-creating growth.”
What Should Congress do?
With the 2023 Congressional calendar winding down, it appears unlikely that Congress will close out the year with a bipartisan tax package to enshrine the TCJA and make the necessary improvements on its framework. Reporting indicates that negotiations are ongoing between the leaders on the House Ways and Means Committee, and a tax deal may materialize in the new year. As Congress returns in 2024, policymakers must prioritize a tax deal that makes America more competitive, bolsters economic growth, and delivers tax certainty for families. Failing to strike a deal would do a disservice to all.
Blogs:
Monday: TPA Statement on FDA Approval of Gene Therapies for Sickle Cell Disease
Tuesday: TPA Attends ALEC’s States and Nation Policy Summit
Wednesday: Tax Reform Delivered, but Congress Must Still Act to Protect Taxpayers and Businesses
Thursday: TPA Submits Comments to FCC Opposing Title II Regulations
Friday: “Seasonal” Postal Hires Weighing Down Santa’s Sleigh
Media:
December 10, 2023: The Daily Mail mentioned TPA in their article, “Empty federal offices 'are costing taxpayers $2.8 MILLION a DAY.’”
December 11, 2023: Issues & Insights ran TPA’s op-ed, “‘Seasonal’ Postal Hires Weighing Down Santa’s Sleigh.”
December 12, 2023: Inside Sources ran TPA’s op-ed, “The FDA’s Not-So-Sweet Puree Purge Harms Consumers.”
December 12, 2023: Florida Daily mentioned TPA in their story, “Taxpayers Protection Alliance Cheers Defense Spending Oversight Act From Florida Congressmen.”
December 12, 2023: The Daily Caller ran TPA's op-ed, "Good News — As Youth Vaping Collapses More Adults Are Using E-Cigs To Quit Smoking."
December 13, 2023: Patrick Hedger appeared on NewsTalk STL radio (St. Louis, MO) to discuss his protest of the Capitals' new taxpayer-funded arena in Virginia and postal reform.
December 13, 2023: Patrick Hedger was interviewed by the Washington Business Journal about the Capitals' new taxpayer-funded arena in Virginia.
December 13, 2023: Patrick Hedger was interviewed by WTOP about the Capitals' new taxpayer-funded arena in Virginia.
December 13, 2023: Patrick Hedger was interviewed by DC News Now about the Capitals' new taxpayer-funded arena in Virginia.
December 13, 2023: Patrick Hedger was interviewed by Virginia Mercury about the Capitals' new taxpayer-funded arena in Virginia.
December 14, 2023: I appeared on WBOB 600 AM (Jacksonville, Fla.) to talk about inflation and banking regulations.
December 14, 2023: WBFF Fox45 (Baltimore, Md.) interviewed me about Mayor Scott’s plan to eliminate vacant properties.
December 14, 2023: Catalyst ran TPA's op-ed, "Price Controls Are Not What the Doctor Ordered."
December 15, 2023: RealClearHealth ran TPA's investigative piece, FDA Bureaucracy Threatens Essential Covid Treatment.
Have a great weekend!
Best,
David Williams
President
Taxpayers Protection Alliance
1101 14th Street, NW
Suite 1120
Washington, D.C. xxxxxx
www.protectingtaxpayers.org
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