Cassidy Signed Americans for Tax Reform Pledge, But Continues to Back Policies That Increase Taxes on Middle-Class Louisianians
BATON ROUGE — Congressman Bill Cassidy’s signature on the Americans for Tax Reform (ATR) “Taxpayer Protection Pledge” in 2010 and again in 2014 is no protection for Louisiana’s middle-class families, who would bear the brunt of significant tax hikes under policies advocated by the congressman.
“Congressman Cassidy’s hypocritical signature on this pledge is just another example of how he’s misled Louisianians and will say anything to get elected,” said Stephen Handwerk, executive director of the Louisiana Democratic Party. “While the congressman claims he’s against raising taxes, the truth is he’s supported policies and pledges that would raise taxes for Louisiana’s middle-class families.”
Signers of the Americans for Tax Reform pledge promise to “oppose any and all efforts to increase the marginal income tax rates for individuals and/or businesses,” as well as “oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.”
- Cassidy has backed a plan to cap deductions on federal tax returns, which would result in higher tuition rates for college students and their families, raise the cost of homeownership and negatively impact contributions to charitable organizations.
- Cassidy has also endorsed a Value Added Tax (VAT), a European-style scheme that would make everyday goods, like milk and butter, more expensive for Louisiana families.
- And last year, Congressman Cassidy signed on to a pledge that would abolish the Internal Revenue Service (IRS) and implement a flat tax, which would eventually raise taxes on Louisiana’s middle-class families and give a huge tax windfall to millionaires and billionaires.
“Not only does Congressman Cassidy have a habit of supporting policies that would raise taxes on Louisiana families, but these policies stand in clear contradiction with the pledge he signed with the Americans for Tax Reform, showing he can’t be trusted,” said Handwerk.
Background
June 2013: Cassidy Signed Onto Ted Cruz’s Proposal To Replace The IRS With A Flat Tax, But Dodged The Question When Pressed
The Advocate: Cassidy Seems To Support A “Tear-It-Down-To-Build-It-Back-Up Approach” To Reforming The IRS. “So that begs the question of whether Cassidy supports a flat tax plan, like Cruz, or more fundamental IRS reforms. Cassidy seems to fall more under the tear-it-down-to-build-it-back-up approach. ‘If you strip them down and start over, you can strip out those portions which have pursued this political agenda and you can also strip it of its mandate to enforce Obamacare,’ Cassidy said in a sit-down interview.” [The Advocate, 6/9/13]
Cassidy Said His Support Of Abolishing The IRS Is “Not Predicated” On The Flat Tax And Would Make A Statement When He “Researched That More.” “Cassidy is more mum though on the flat tax issue though. ‘My statement is not predicated on that (flat tax) debate,’ Cassidy said. ‘I will make a statement on that when I’ve researched that more.’” [The Advocate, 6/9/13]
The Advocate Noted The “Awkward Aspect” Of The IRS Petition Being Funded By The Senate Conservatives Fund, Which Refused To Endorse Cassidy. In June 2013, The Advocate reported on Cassidy’s support of Senator Ted Cruz’s petition to abolish the IRS: “Then there’s the somewhat awkward aspect of Cruz’s petition being funded by the far-right Senate Conservatives Fund, which refuses to endorse Cassidy because the group does not consider him conservative enough. The group is considering backing retired Air Force Col. Rob Maness, of the New Orleans area, who also is planning to run against Landrieu.” [The Advocate, 6/9/13]
Ted Cruz Has Proposed Replacing The IRS With A Flat Tax
Ted Cruz Proposed A Flat Tax That Would Maintain Deductions For Charitable Contributions And A Home Mortgage. “We ought to abolish the IRS and instead move to a simple flat tax, where the average American can fill out our taxes on a postcard. Put down how much you earn. Put down a deduction for charitable contributions and home mortgage. And put down how much you owe.” [Washington Post,6/3/12]
Ezra Klein Noted That Cruz’s Flat Tax Would Still Require A Revenue Agency To Audit And Enforce. “And Cruz’s flat tax is actually a bit more complicated than most. It includes deductions for mortgages and charitable contributions. What if everyone says they gave a million dollars to charity and own a huge home? Who’s going to check all that out? Well, some well-meaning flat-tax collection agents, I guess.” [Washington Post, 6/3/12]
Tax Experts Generally Agree That Flat Taxes Are Far More Regressive Than The Current Tax System And A Transition Would Be Far From “Simple”
A Flat Tax Would Be “Much More Regressive” Than The Current System, Increasing The Burden On Lower And Middle Class While Lowering It On The Upper Class. “A flat tax would be much more regressive than the current income tax. For one thing, it’s unlikely to include the refundable tax credits (like the EITC and child credit) that augment the earnings of low earners. It’s not impossible to add refundable credits, but I’ve never seen them in a flat tax proposal. As a result, poor people will pay a larger share of their income than they do at present. Middle-income people will also pay more. Moreover, spending falls as a share of income as income rises. Low-income people spend all their income or more. High-income people spend only a tiny fraction. A VAT or flat tax inevitably exempts most of the income of high-income people from tax. If it is going to raise the same amount of revenue as the current system, it must raise somebody else’s taxes. That would be low- and middle-income people.” [Len Burman, Tax Policy Center, 10/24/11]
Bruce Bartlett: “Even If One Agreed With The Ultimate Goal Of… [Raising] Taxes For Most Americans While Massively Cutting Them For The Ultra-Wealthy, Getting From Here To There Is Practically Impossible.” Furthermore, even if one agreed with the ultimate goal of having a single-rate tax system on a consumption base that would raise taxes for most Americans while massively cutting them for the ultra-wealthy, getting from here to there is practically impossible. For example, homeowners would suffer a 15 percent reduction in the value of their homes from withdrawal of the mortgage interest deduction even if they themselves paid no more taxes in total than they do now.” [Bruce Bartlett, Fiscal Times, 4/19/13]
Bruce Bartlett: “The Simplicity Of The Flat Tax Was Purely Superficial; The Postcard Return Meant Little And Having A Single Tax Rate Contributes Little To Simplicity Because The Rate Structure Has Little To Do With Tax Complexity.”“In short, the simplicity of the flat tax was purely superficial; the postcard return meant little and having a single tax rate contributes little to simplicity because the rate structure has little to do with tax complexity, which mainly relates to the tax base. Even if it were allowed to operate as intended – a political impossibility – the transition from our current system to the flat tax would be massively complex.” [Bruce Bartlett, Fiscal Times, 4/19/13]
Studies Of 2012 Presidential Candidate Flat Tax Proposals Found That They Reduced Revenue And Redistributed Income Toward The Wealthy
A Nonpartisan Study Of A Flat Tax Proposal Introduced By Rick Perry During The 2012 Election Found It Would Cost Almost One Trillion In Lost Revenue By 2015. “Presidential candidate Rick Perry’s tax plan would cost $995 billion in foregone federal revenues in 2015, based on current law, according to an independent study released on Monday. The Perry plan would slash projected revenue by roughly 27 percent, said the Tax Policy Center, a non-partisan think tank run by the Brookings Institution and the Urban Institute. The center’s study highlights how lucrative a 20 percent option flat tax would be for the wealthiest Americans.” [Reuters, 10/31/11]
A Tax Expert Said The Plan Was “Really Redistributing Income Greatly Toward The Top End.” “The after-tax income of the top 0.1 percent of taxpayers would go up 37 percent in 2015, under the plan, compared to current law, assuming the top-rate bracket will revert to 37.9 percent after 2012. But the after-tax income of the bottom 20 percent of taxpayers would rise by just 0.6 percent. The plan ‘is exactly what you would expect out of a tax like this,’ said Roberton Williams, a senior fellow at the center. He said, the plan is ‘really redistributing income greatly toward the top end.’” [Reuters, 10/31/11]
Value Added Tax Would Raise Prices, Increase Tax Evasion
The Value Added Tax Would Be Leveled On Top Of State Sales Taxes. “State Sales Taxes. Forty-six states levy a sales tax. A VAT at the federal level would be similar to state sales taxes. States would likely strongly resist any federal attempt to usurp their sales tax authority because they rely on sales tax revenue. A VAT at the federal level would likely force states to apply their sales taxes to a uniform set of goods and services. This would take from the states their ability to tailor their sales taxes to their desires and each state’s unique economy. States would also be forced to keep their rates within a narrow range. Because the VAT rate would likely begin relatively high, it would leave states little room to lower their sales tax rate to increase their competitiveness compared to other states. Further, a federal VAT would increase sales tax evasion, thus reducing state tax receipts, possibly significantly.” [Heritage Foundation, 12/21/10]
Heritage: “A VAT Would Undoubtedly Raise The Prices Of Everything That Consumers Buy.” “Some argue that a VAT would encourage saving because it would raise the prices of everything we buy. In this line of thinking, Americans would buy fewer goods and services and therefore save money that they formerly spent. A VAT would undoubtedly raise the prices of everything that consumers buy, but this would not increase the savings rate. The low savings rate is not the result of low prices, but of the current tax code that discourages savings by taxing returns of investment through taxes on capital gains, dividends, and interest. Adding a VAT would not change this. As long as the income tax continues to tax capital income and capital gains, the tax code will continue to discourage saving.” [Heritage Foundation,12/21/10]
Sen. Mary Landrieu Opposed A Value Added Tax In Congress
Sen. Mary Landrieu Voted To Express The Sense Of The Senate That A “Value Added Tax Is A Massive Tax Increase That Will Cripple Families On Fixed Income And Only Further Push Back America’s Economic Recovery.” [S. Amendment 3724, Vote #115, 4/15/10]
During The 2012 Election, Mitt Romney Proposed A Cap On Tax Deductions.
Tax Analysts Said That The Deduction Cap “Would Increase The Tax Burden On Many Middle-Class Taxpayers.” “The Romney campaign has characterized a limit on deductions as just one of the options Romney might pursue if he is elected. Tax analysts said it is difficult to evaluate the idea, since Romney has provided few details and has tossed out several dollar figures as a potential cap. But critics say such a cap could be problematic in two significant ways: It would increase the tax burden on many middle-class taxpayers and it would not make up for the roughly $5 trillion in federal revenue over 10 years that would be lost in Romney’s plan.” [Boston Globe, 10/4/12]
The American Enterprise Institute Estimated Any Charitable Deduction Cap Would Result In A Significant Decline In Charitable Giving. “Individual giving to charities would drop by more than 4 percent overall if the charitable deduction were capped at 28 percent for the nation’s highest earners, but secular giving would dip by more than 7 percent as a result. The American Enterprise Institute (AEI) estimated the effects of capping the charitable deduction in a study released today, ‘Give til it hurts?: The Great Recession, tax policy, and the future of charity in America.’ The 4.35 percent dip in giving would equate to a decline of $9.4 billion in the first year, based on Giving USA’s estimate of $218 billion in individual giving in 2011. The top 1 percent of earners would reduce giving by 24 percent while taxpayers who itemize would reduce giving by 9.3 percent. Religious giving would see the smallest effect, a drop of 0.95 percent, but secular giving would dip by 7.02 percent.” [The NonProfit Times, 12/3/13]
The United Way Strongly Opposes Any Charitable Deduction Cap. “First, as the tax reform debate unfolds during the next two years, we want to ensure that revenue proposals do not inadvertently harm the people at the bottom of the income spectrum: the families and individuals who rely most on services provided by charities. We recognize that our nation continues to face daunting challenges, including an obvious need to reduce the deficit. However, new limitations on the deductibility of charitable donations are effectively a tax on charities and would lead to a significant reduction in services to the poor. Conversely, the additional revenue to the government would be insignificant compared to the impact on reducing the deficit. I urge you to refrain from limiting charitable giving incentives contained in the tax code as a source of revenue for deficit reduction, at the expense of the poor who need our help the most right now.” [United Way, 1/4/11]
Higher Education Groups Said They Were “Deeply Concerned” By A Charitable Contribution Cap And Said They Might Have To Raise Tuition. “Colleges have particular reason for concern. Compared to charities such as religious or social service organizations, education gets a hugely disproportionate share of contributions from the well-off. It’s wealthier taxpayers who itemize and benefit most from deductions — the higher your marginal tax rate, the bigger the ‘discount’ you get on your taxes for giving to charity. So incentives for the wealthy to donate less could particularly affect education. ‘We’re deeply concerned they’ll do something very quickly before the end of the year that they don’t really understand the consequences for giving,’ said Steven Bloom, director of federal relations at the American Council on Education, which has written to the White House and Congressional leaders on behalf of 16 higher education groups opposing caps. If colleges raise less from private donations, they might have to raise more from tuition, he said.” [Associated Press, 12/3/12]
The American Benefits Council Found Capping Health Plan Tax Exclusion Would Erode Retiree Health Coverage. “Retiree health coverage has decreased in recent years, but many retirees (and their surviving spouses) still receive health coverage through former employers. For example, in 2011, over 37% of large employers offered health coverage to pre-65 retirees (EBRI 2012). The coverage provided by those former employers is excluded from taxable income for the retiree. Because retirees are older and use more health care services than an average employee, the retiree group would be much more likely to incur higher taxes under any cap on the health plan exclusion. If, on the other hand, the employer combined the more expensive retiree group with its active work force in valuing the health plan benefits, then the active workers might experience a larger tax increase because the retirees were covered. Either way, the employer’s incentive to continue to maintain retiree health coverage of any kind would be reduced. And this is just one example of the complexity and potential unintended consequences that come with any proposal to cap the health plan exclusion.” [American Benefits Council, 4/17/14]
The American Benefits Council Found Capping Health Plan Tax Exclusion Would Result In “Substantial Middle-Class Tax Increase.” “Employees in more expensive health plans are not necessarily richer. A recent analysis of a proposal to cap the health plan exclusion at the 75th percentile of 2013 average health plan costs found that the taxpayers that would experience a tax increase were spread across all income levels (Clemans-Cope, Zuckerman, Resnick, 2013). Overall, 20% of taxpayers would see an average estimated tax increase of $633 in 2013 and $1,133 in 2023. Affected taxpayers in the middle income quintile (those with 2012 income between $48,516 and $78,595) would see an average tax increase of $914 in 2023.” [American Benefits Council, 4/17/14]
The Congressional Budget Office Studied A Proposal To Cap Health Care Tax Deductions And Found It Would Raise $500 Billion In Taxes And Would Result In 6 Million Fewer People Insured By Their Employers By 2019. “The second alternative would eliminate the excise tax and instead impose a limit on the extent to which employer-paid health insurance premiums and contributions to FSAs, HRAs, and HSAs could be excluded from income and payroll taxation. Specifically, starting in 2015, any contributions that employers or workers made for health insurance and for health care costs (through FSAs, HRAs, and HSAs) that together exceeded $6,420 a year for individual coverage and $15,620 for family coverage would be included in employees’ taxable income for both income and payroll taxes. Those limits, which are based on the estimated 50th percentile for health insurance premiums paid by or through employers in 2015, would be indexed in subsequent years for inflation using the CPI-U. The same limits would apply to the deduction for health insurance available to self-employed people. Capping the tax exclusions at lower thresholds than the ones scheduled to take effect for the excise tax would reduce federal tax subsidies. For example, in 2019, the caps for individual and family coverage under that alternative would be $7,000 and $17,000, respectively, whereas the current-law thresholds for the excise tax would be $10,550 and $28,400, respectively, in that year. That alternative would decrease federal deficits by $537 billion between 2015 and 2023, JCT and CBO estimate. The reduction in the tax subsidy for employment-based health insurance would cause about 6 million fewer people to have employment-based coverage in 2019 than under current law. In that year, about 4 million more people would buy coverage through the exchanges, about half a million more people would enroll in Medicaid or the Children’s Health Insurance Program (CHIP), and an additional one and a half million people would be uninsured.” [CBO, 11/13/13]
April 2014: Congressman Cassidy Signed The Americans For Tax Reform Pledge. [ATR, accessed 7/2/14]
· Congressman Cassidy Also Signed The Americans For Tax Reform Pledge In 2010. [ATR Pledge, ontheissues.org, accessed 7/2/14]
The ATR Pledge Commits The Official To Oppose “Any Effort To Raise The Federal Income Tax On Individuals Or Employers.” “Elected officials who have taken the Pledge to taxpayers commit to oppose and vote against any effort to raise the federal income tax on individuals or employers. The pledge does not stand in the way of any tax decreases or revenue neutral changes to the income tax.” [ATR, accessed 7/2/14]
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