NCPA - National Center for Policy Analysis
NCPA - National Center for Policy Analysis
Barry is a Senior Economist with the National Center for Policy Analysis, one of the most influential think tanks in America today.

The National Center for Policy Analysis (NCPA) is a nonprofit, nonpartisan public policy research organization, established in 1983. The NCPA's goal is to develop and promote private alternatives to government regulation and control, solving problems by relying on the strength of the competitive, entrepreneurial private sector. Topics include reforms in health care, taxes, Social Security, welfare, criminal justice, education and environmental regulation.

NCPA Motto - Making Ideas Change the World - reflects the belief that ideas have enormous power to change the course of human events. The NCPA seeks to unleash the power of ideas for positive change by identifying, encouraging, and aggressively marketing the best scholarly research.

Daily Policy Digest

Provided courtesy of: NCPA

Daily Policy Digest

Fraud in the Tax Code
19 Dec 2014 07:00:58 CDT -

According to a new report from Senator Tom Coburn (R-Okla.), America's tax gap -- the difference between the amount of taxes owed to the federal government and the amount actually received -- will be close to $483 billion in 2014. While complexity and inadvertent errors are a large part of the reason for the tax gap, some of the gap is due to fraud.

How much of the gap is due to fraud? It's not clear. While the IRS refers suspected tax fraud cases for investigation, Coburn's report says the agency does not actually track the outcomes of those cases -- how many of them turn out to be intentional wrongdoing is unknown. There are certain tax credits and deductions, however, with high "improper payment" rates:

  • The Earned Income Tax Credit (EITC) provides credits to working adults in poverty. In 2014, the EITC is estimated to cost taxpayers $69.2 billion. According to a 2013 government report, between $13.3 billion and $15.6 billion in improper payments were made in 2013. Between 2003 and 2013, between $124.1 billion and $148.2 billion improper payments were made.
  • Since 2009, the American Opportunity Tax Credit (AOTC) has given credits -- up to $2,000 -- to students enrolled in higher education. But the Inspector General of the U.S. Treasury reported in 2011 that 1.7 million AOTC claimants received $2.6 billion in credits but offered no evidence they were actually enrolled in school, over 370,000 taxpayers received $550 million in credits but were not eligible for them and even 250 prisoners received the AOTC. The report concluded there were $3.2 billion "erroneous" education credits paid to 2.1 million taxpayers as of May 2010.
  • Federal fuel tax revenues are used to fund the highway system, but taxpayers who use fuel for off-road purposes (such as fishing, farming, or nonprofit educational operations) can receive a credit for the taxes. Of the $176 million in fuel credits claimed in 2011, one-fifth "had questionable characteristics, such as little or no reported income from self-employment or farming," according to a government report.
  • Divorce alimony payments can be deducted from a person's taxable income and must be reported in the recipient's income. In 2010, almost half (47 percent) of the 568,000 tax returns with alimony deductions did not match the amount reported by recipients. The government estimates that $2.3 billion in taxable income was never taxed.

In addition to these tax expenditures, Coburn notes that identity theft is a growing problem, with perpetrators using taxpayer information to claim refunds. More than 1 million tax returns filed in 2011 were identified as the product of identity theft. A government report found an additional 1.2 million returns that appeared fraudulent but were not caught by the IRS' fraud filters.

Source: "Tax Decoder," Office of Senator Tom Coburn, December 2014. 

For more on Tax and Spending Issues:

Replicating Economic Growth Reforms of the 1980s and 1990s
19 Dec 2014 07:00:57 CDT -

Republicans will take over the House and Senate in January 2015, but can a Democrat president and a Republican Congress actually get anything done? According to former Senator Phil Gramm (R-Texas) and Michael Solon of US Policy Metrics, yes: Presidents Ronald Reagan (R) and Bill Clinton (D) both held office with divided governments -- and also in the midst of recessions -- and each were able to spark economic growth.

Gramm and Solon highlight some bipartisan policy achievements of the Reagan and Clinton presidencies, including spending cuts, tax cuts, Social Security reform, passing a Balanced Budget Agreement, welfare reform and the NAFTA trade agreement. Those efforts, they write, were accomplished with support from 66 percent of congressional Democrats and 84 percent of Republicans, leading to strong economic growth.

If today's Congress embarked upon similar measures to spur the economy, Gramm and Solon say the nation would see similar benefits:

  • Under Reagan, Congress dropped the top marginal tax rate from 50 percent to 28 percent and created just two tax brackets rather than 14. Similar reform today would produce similar growth.
  • Under Clinton, Congress passed a Balanced Budget Act that imposed restraints on spending. Passing a similar act today would save the nation $1.9 trillion over the next 10 years.
  • Today's slow economic growth has resulted in a federal revenue loss of $5.4 trillion below the United States' 10-year revenue projections since 2007. In all previous postwar recoveries, the United States recaptured all lost recession revenues. If today's Congress passed similar Reagan-era tax reform and Clinton-era budget reform and recaptured just one-third of the revenues lost since the recession, Gramm and Solon contend the United States would see a $1.8 trillion drop in its 10-year deficit.
  • During the Clinton presidency, Congress passed welfare reform in 1996. Were today's Congress to restore the welfare work requirements that have been waived and apply similar restrictions to all means-tested programs, welfare spending would fall. Gramm and Solon estimate that reducing the welfare spending increase by half would save $731 billion over the next 10 years.

During the last six years of the Reagan and Clinton presidencies, the United States' average economic growth rate was 4.4 percent. America's economic growth rate has been just 2 percent since the end of the recession in 2009.

Source: Phil Gramm and Michael Solon, "The Reagan-Clinton Template for Success," Wall Street Journal, December 16, 2014.

For more on Economic Issues:

New York Fracking Ban Will Cost the State Jobs, Revenue
19 Dec 2014 07:00:56 CDT -

Despite the fact that fracking is lowering energy costs and raising American GDP -- with an ICF International study estimating American consumers saved from $63 billion to $248 billion in 2013 alone due to fracking -- New York Governor Andrew Cuomo (D) plans to prohibit racking the state of New York.

Erica Orden and Lynn Cook of the Wall Street Journal report that New York has had a fracking moratorium since 2009, but the ban would officially keep 12 million acres of resource-rich Marcellus Shale from being developed. As a result, New York will lose out on the economic benefits that its neighbors have reaped from shale drilling:

  • Pennsylvania, which also lies atop the Marcellus Shale, has received over $2.1 billion in state and local taxes from energy companies due to the shale boom.
  • From the first quarter of 2010 to the beginning of 2014, Pennsylvania saw its energy employment rise from 13,059 jobs to 28,229 jobs.
  • Average salaries in Pennsylvania for energy-related jobs is $93,000 annually, much higher than the state's average $40,000 salary.

Landowners are unhappy with the decision. Orden and Cook interviewed one New York dairy farmer who was hoping to lease his land to energy companies in order to cover the costs of his property taxes. He told the Wall Street Journal, "The amount of shale available is more valuable than the surface of the land will ever be. The state controls the most valuable part of our farm."

Source: Erica Orden and Lynn Cook, "New York Moves to Ban Fracking," Wall Street Journal, December 18, 2014. 

For more on Environment Issues:

Customers Face High Energy Prices Thanks to European Climate Agenda
19 Dec 2014 07:00:55 CDT -

Despite 18 years of no global warming, European nations have continued to push a climate change agenda, to the detriment of consumers, writes Sterling Burnett of the Heartland Institute.

The European Union agreed to the Kyoto Protocol in 2002, pledging to reduce its carbon emissions to 8 percent below 1990 levels. But, forced to comply with emissions limits not imposed on other parts of the world, Burnett writes that many European businesses fled, moving to countries with lower energy costs and no emissions limits.

Climate change policy has been extraordinarily expensive for Europe:

  • From 2004 to 2013, EU states spent $882 billion on renewable energy projects.
  • By 2030, Germany -- whose citizens face some of the highest energy costs in all of Europe -- could alone spend $1 trillion transitioning to renewable energy.
  • Electricity prices in Europe are twice that of the United States.
  • Relative to Europe, the U.S. manufacturing -- operating with lower energy prices -- saved $130 billion in 2012.

Burnett notes that the EU seems to have recognized that its unilateral carbon dioxide reductions have only hurt its own member states. The EU has agreed to further reduce its emissions by 2030 but only if the United Nations completes a binding climate treaty that would require other nations to make similar reductions.

Source: H. Sterling Burnett, "Harmful Consequences of EU Climate Policy," Heartland Institute, December 5, 2014. 

For more on Environment Issues:

Reforming No Child Left Behind
19 Dec 2014 07:00:54 CDT -

Lawmakers are looking to reauthorize the 2001 No Child Left Behind (NCLB) law, but Lindsey Burke, education policy fellow at the Heritage Foundation, says reauthorization of the program must be accompanied by major reforms.

NCLB is a federal accountability law for education that sets certain standards for school districts related to academic achievement, but the program has ballooned in size and imposes burdensome requirements on school districts. Burke offers four suggestions for reforming the program:

  • Allow states to opt out of NCLB programs so that they can better take measures and spend funds to meet their students' needs.
  • Reduce NCLB cost and program size. While the original Elementary and Secondary Education Act was just 32 pages long and cost $1 billion, NCLB is 600 pages long, costs $25 billion annually and includes dozens of programs. Educational outcomes have not improved with the increased spending.
  • Get rid of burdensome requirements. NCLB includes a number of mandates aimed at accountability and transparency, but Burke says many of them are merely burdensome and require high levels of state spending in order to receive federal funding.
  • Title I education funds are distributed via a formula that is supposed to send education funds to low-income areas. However, the formula is confusing and often fails to achieve that goal. Burke suggests simplifying the formula as well as making the funding "portable," allowing states to send Title I dollars to the school of a parents' choice.

Burke notes that Senator Lamar Alexander (R-Tenn.) will chair the Health, Education, Labor and Pensions committee in January and has announced his intention to reauthorize NCLB before the summer.

Source: Lindsey Burke, "Reauthorizing No Child Left Behind: Four Recommendations to Advance Federalism in Education," Heritage Foundation, December 8, 2014. 

For more on Education Issues:

What Is the Tax Gap?
18 Dec 2014 07:00:53 CDT -

The American tax code is confusing. Senator Tom Coburn (R-Okla.) has released a 300-page report on the U.S. tax code, detailing just how complex filing taxes has become. Between 2001 and 2012, more than 4,600 changes were made to the tax code -- an average of more than one per day. As of 2012, the Internal Revenue Code was 9,000 pages long.

That the tax code is complex is evidenced by the amount of time Americans spend complying with it:

  • Americans spend 6.1 billion hours annually complying with IRS filing requirements, which Coburn notes is equal to an entire year's work for 3 million full-time workers.
  • Most people rely on third parties to prepare their taxes. For individual filers, 59 percent used tax preparers in 2010, and 30 percent used tax software.
  • Businesses also use tax preparers, and compliance is especially costly for small businesses -- according to the NFIB, it costs small businesses 67 percent more to comply with the tax code than it costs large businesses.
  • Small businesses spend between $18 and $19 billion annually in tax compliance costs. That money, the report says, could otherwise "be used to hire new employees, invest in research and development, or market products."

There is another cost to this complexity: the tax gap. The tax gap is the difference between the amount owed to the federal government and the amount actually paid; in 2006 (the most recent data available), that gap was at $450 billion. It dropped to $385 billion after late payments were made and the IRS took enforcement action. The government's collection rate for that year was 86 percent, in line with previous rates. If these trends continue, the 2014 tax gap will be close to $500 billion; were it paid, the Coburn report says the entire 2014 deficit ($483 billion) could disappear.

How to close the tax gap? The report offers a few options, one of which is to prevent serious tax delinquents from being employed by the federal government, as their salaries are paid by taxpayers. According to a 2013 IRS report, 318,000 federal workers owed more than $3.3 billion in federal taxes, not including the taxpayers already paying back tax debts through installment agreements.

But, according to the report, the easiest option would be to make the tax code simpler and eliminate the likelihood of mistakes. Not only do payment errors result from the complexity, but more complexity leads to more confusion, with the IRS increasingly unable to meet its demands:

  • The IRS saw an increase in phone calls from taxpayers seeking help from 71 million to 108 million between 2004 and 2012.
  • Over that same time, the number of phone calls answered fell from 36 million to 31 million.
  • During the same period, the IRS had a written correspondence backlog that tripled from 357,151 cases to 1,028,539 cases.

The report also notes that an overly complex tax code opens the door to tax avoidance, and taxpayers look for loopholes and ambiguities hidden within its 9,000 pages.

Source: "Tax Decoder," Office of Senator Tom Coburn, December 2014. 

For more on Tax and Spending Issues:

Health Policy Digest

Provided courtesy of: NCPA

Consumer Driven Health Care

Health Care Reform Tax Will Hurt Franchisees
04 Oct 2011 12:43:58 GMT - When the employer mandates go into effect in 2014, many franchised businesses will be motivated to reduce the number of locations and move workers from full-time to part-time status...


Saving Jobs from Health Reform's Harmful Regulations
04 Oct 2011 12:43:58 GMT - If the rate of health care cost growth had not exceeded general inflation, a typical family would have had $545 more per month in spendable income instead of $95 -- a difference of $5,400 per year...


Does Health Insurance and Seeing the Doctor Keep You Out of the Hospital?
04 Oct 2011 12:43:58 GMT - Gaining health insurance and using more primary care services leads to more hospitalizations as a result of physicians' discretionary decisions regarding aggressive and intensive treatment...


The Case for Competition in Medicare
04 Oct 2011 12:43:58 GMT - A well-functioning marketplace would set in motion the forces needed to transform American medical care into a model of efficient patient-centered care...


Potential Effect of Health Care Reform on Emergency Department Utilization Not Clear
04 Oct 2011 12:43:58 GMT - In 2010, 71 percent of emergency physicians said that they expected emergency department visits to increase due to the implementation of the Affordable Care Act...


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