There are a lot of issues that the Taxpayers Protection Alliance (TPA) works on. And, at times, there are natural crossovers like the infrastructure bill that will combine a massive amount of spending and potential tax increases. There are times there seems to be no natural connection. For example, TPA has been working on reforming the United States Postal Service (USPS). We have also been talking about how certain members of Congress want to break up Big Tech companies like Amazon. It dawned on me earlier this week that while the USPS hemorrhages money and falls behind in delivering packages, Congress refuses to do anything to fix the beleaguered agency. But, Congress is trying to break up Amazon, which has been a model of success and efficiency and quite frankly, a lifeline for many during the pandemic. To me, that sums up Congress, they have the wrong priorities.

Colorado Rate-Setting

Just when we think we’re out (done with rate-setting) they drag us back in. Last year, the No Surprises Act was passed. The legislation, while not perfect, addresses surprise medical bills without rate-setting. Well, last week, lawmakers in the Colorado House debated the merits of the latest proposal to create a government-run public insurance option (House Bill 1232), deciding more time was needed to determine what exactly was in the proposal and ultimately delaying the vote. Besides there being uncertainty about what exactly the lawmakers are considering, Colorado taxpayers who will be footing the bill for the proposal have been largely excluded from the process. In fact, just days before the protracted debate on the public option, it was reported that House Bill 1232 wasn’t a public insurance option at all and that “Democratic legislators said they’d made a deal with the health industry to scrap the public option and instead mandate lower premiums for those buying coverage on the
individual or small-group markets.”

Public option or not, it is clear that government price controls are once again being pitched as the cure to solving health care problems in Colorado. House Bill 1232 would empower the unelected Commissioner of Insurance to mandate arbitrary prices based on the whims of politicians. Unfortunately, lawmakers who support rate-setting have given little thought about how price-setting would impact patients across the state, the doctors who serve them, or the entire health care system that supports them. As the Colorado General Assembly has considered House Bill 1232, it is the big insurance companies that have been pressuring lawmakers to include government rate-setting as the mechanism to control prices within that taxpayer-funded public insurance option. It’s easy to see why the big insurance companies are pushing for rate-setting: it would lower the amount they would have to pay out to doctors. Meanwhile, the big insurance companies would continue to take in big money to provide the
price-controlled coverage. In other words, the big insurance companies are simply aiming to line their pockets at the expense of taxpayers and at the peril of patients and their doctors.

This rate-setting would inevitably lead to a scarcity of care and reduction in quality. Rate-setting would result in fewer doctors being available to see patients in Colorado. There would be fewer ambulances and fewer urgent-care facilities. This isn’t just hype. There is evidence from California to see what would happen if rate-setting were instituted in Colorado. Lawmakers in the Golden State have tried a similar rate-setting approach to the one contained in Colorado House Bill 1232, and the effects have been devastating. According to a 2019 analysis in the American Journal of Managed Care, doctors took a huge pay cut, and there were consolidations across the health care market, leaving patients with fewer and more distant options for care. Doctors reported that they were considering leaving California when they were no longer able to negotiate with the insurance companies and this would result in patients having to travel farther and farther to access even the most basic care, let alone
more specialized medical procedures. It’s no surprise that in California, the number of patient complaints has gone way up.

Colorado lawmakers have not been upfront with the citizens of Colorado. If House Bill 1232 is enacted into law, patients would suffer and insurance companies will profit. Coloradans should be asking their lawmakers whether the government price controls in House Bill 1232 are really just another big payout for big insurance.

Die Once, Pay Twice

This may seem like the title of a bad James Bond movie (I won’t ask you your favorite James Bond… mine is Roger Moore), it’s not, it’s a reference to the Capital Gains tax increase proposed by the Biden administration. The Biden administration is proposing a tax hike that would make sure Americans are taxed twice in the event of a death in the family. So, while people may only die once, their family or loved ones would have to pay twice. The proposal would eliminate what’s known as the “stepped up basis rule.” This rule shifts the base valuation of an asset that is inherited after the passing of a loved one. For example, if someone inherits a home that was worth $200,000 at initial purchase, but is worth $1 million at the time of the owner’s death, under the step up rule the new owner’s gains on the property would be based on the $1 million valuation. In such a scenario – without the step up rule – the inheritor would be subject to the 40 percent estate tax and would then have to pay th
e 39.6 tax – up from the current 20 percent – on an $800,000 “capital gain.” This works out to a roughly 64 percent tax before anything else happens. Losing a loved one is difficult enough without worrying about the government potentially decimating their estate and leaving the family to worry about the rest. This proposal would act as a second, more insidious death tax. To pay the tax on that “$1 million” house would most certainly involve the selling of that house in order to pay the tax. Therefore, nothing is actually inherited. Now, imagine a small business that was supposed to be handed down to the next generation and all of the assets were to be sold to pay the tax. That business would be gone. This is even more outrageous when considering the fact that the assets being inherited are the product of after-tax income. Not only is it taxed every year through the basic income tax, but will be taxed again through the estate tax, and again through this modified capital gains tax. Far
from being compassionate toward the grieving, this proposal makes sure their bereavement is a nightmare for so many more reasons.

The Biden administration markets this tax as raising the rates on the ultra-wealthy. It would take the current capital gains tax rate from 20 percent to 39.6 percent. This tax would only apply to those making more than one million dollars. That seems simple and straightforward enough. However, this does not spare families that are asset rich (to meet the threshold) but cash poor and unable to pay. The devil is in the details, and this proposal is riddled with secondary provisions that will make this tax hike a nightmare for many Americans. First, considering other taxes on investments – as well as state and local rates – the average effective capital gains rate will go up to just under 50 percent if the administration’s proposal passes. In fact, for thirteen states, as well as the District of Columbia, the combined capital gains rate would be over 50 percent. Residents of New York City, for example, would pay a top rate of 58.2 percent. This is gratuitous.

The capital gains tax increase is insidious enough. More concerning is a proposal floating around the halls of Congress that would make it retroactive. Under the proposal, investors would have to pay the new rate on investments that were made as early as 2005. This violates a number of policy norms. Investors made investment decisions based on information available to them at the time. Many would likely have avoided the risk had they known they might soon be on the hook for a 50 percent bill. Further, given the passage of time, many Americans will have to pay taxes on assets they no longer own. All of this reflects a massive misunderstanding about what “wealth” is and what it is not. The common understanding of wealth in the halls of Congress – as well as the White House – seems to be that net worth symbolizes liquid cash on hand. That could not be further from the truth. Net worth includes resources on hand, like property and equipment. For example, a business owner can’t pay the
government 40 percent of a forklift. They will either have to sell off resources they need or sell off the business altogether. This will inevitably harm small businesses. By creating this nightmare set of tax laws that go hand-in-hand with investment, it is no stretch to say that many investors will decide it is not worth supporting American startups or small businesses. The reward has no longer become worth the risk. The same businesses who have struggled mightily this last year will lose yet another lifeline, thanks to the administration’s proposal.

The federal government does need to consider how to pay for its exorbitantly expensive proposals. However, with proposals like these, it will be the American people who are paying for it for years to come, especially those dealing with family heartbreak. Despite the rhetoric, millionaires and non-millionaires alike will be holding the bag. The key difference is that the millionaires are the ones who might be able to afford it.

BLOGS:

Monday: Low-Income & Smoking: 50 State Analysis​ ([link removed])

Monday: Sale of AOL and Yahoo Wrecks ‘Big Tech’ Hysteria ([link removed])

Tuesday: Carr Calls Out Mosby’s ‘Blatantly Unconstitutional’ Complaint ([link removed])

Wednesday: Taxpayers Protection Alliance Launches “No Big Handouts for Big Insurance” Ad Blitz in Colorado ([link removed])

Friday: Craft Beer Month Perfect Time to Celebrate Small Businesses ([link removed])

Media:

May 10, 2021: WBFF Fox45 (Baltimore, Md.) interviewed me about the Biden administration forcing companies to relinquish intellectual property protections on vaccines.

May 10, 2021: WBFF Fox45 (Baltimore, Md.) quoted TPA in their story, “Local business owners blame unemployment benefits for difficulty in finding workers

May 11, 2021: I appeared on KRC 550 AM (Cincinnati, Ohio) to talk about unemployment spending and the Postal Service.

May 11, 2021: The Boston Herald (Boston, Mass.) ran TPA’s op-ed, “Want fewer teens smoking? Don’t ban vapes.”

May 11, 2021: The Center Square ran TPA’s op-ed, “Just another big payout for Big Insurance in Colorado.”

May 11, 2021: WBFF Fox45 (Baltimore, Md.) quoted TPA in their story, “Mosby using SAO resources for defense is 'taxpayer-funded abuse of power,' watchdog says.”

May 11, 2021: MyJournalcourier.com ([link removed]) ran TPA’s op-ed, “Heavy-handed internet regulations have failed users.”

May 12, 2021: The Center Square ran TPA’s op-ed, “U.S. Rep. Comer must lead on postal reform.”

May 12, 2021: Townhall.com ([link removed]) ran TPA’s op-ed, “New Tax Increase Would Act as a Double Death Tax.”

May 13, 2021: WBFF Fox45 (Baltimore, Md.) interviewed me about the Jones Act

May 13, 2021: I appeared on WBOB 600 AM (Jacksonville, Fla.) to talk about inflation and earmarks.


**

Have a great weekend!

Best,

David Williams
President
Taxpayers Protection Alliance
1401 K Street, NW
Suite 502
Washington, D.C. xxxxxx
www.protectingtaxpayers.org ([link removed])
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