Michigan governor defends proposal for steep fuel tax rise
By DAVID EGGERT
Tuesday, March 5
LANSING, Mich. (AP) — Democratic Gov. Gretchen Whitmer on Tuesday defended her proposal to nearly triple Michigan’s per-gallon gasoline tax to make it the highest in the nation, promising no more “shell games” or “half measures” to reverse the deteriorating condition of the roads.
The proposal — the centerpiece of a $60 billion budget plan — followed her November election victory over Republican Bill Schuette in part on a promise to “fix the damn roads.”
The $2.5 billion plan would increase the 26-cent fuel tax by 45 cents between this October and October 2020 and guarantee that the additional revenue is targeted to more heavily traveled roads. To alleviate the burden for some motorists, she proposed a tax overhaul under which retirees and low-income earners would get breaks while more businesses would pay a 6 percent tax instead of the lower 4.25 percent personal income tax.
The proposal is an attempt to reverse parts of a tax rewrite enacted by her Republican predecessor, Rick Snyder.
“No one likes to raise taxes,” she told lawmakers during her first budget address as governor. “I wish I didn’t have to come here today and put this budget before you because I know it’s hard. But the hard truth is we got to get to work. Every day we don’t we are jeopardizing our economic future, wasting our money and endangering our people. No more shell games and half measures. Here’s a real plan.”
Her road-funding plan will face resistance in the Republican-controlled Legislature, where one GOP lawmaker called it “completely unrealistic.” Legislators previously passed fuel and vehicle registration tax hikes that took effect in 2017, but they have been criticized for not generating nearly enough revenue under laws that also shifted spending from other budget priorities. Critics said the tax hikes only slowed the decline of road conditions.
States across the nation are struggling with how to finance road maintenance and construction as vehicles become more fuel-efficient and generate less revenue from flat per-gallon taxes. New Ohio Gov. Mike DeWine, a Republican, is seeking an 18-cent gas tax increase.
Whitmer quickly came under criticism from some in the GOP because last year, in a gubernatorial debate , she dismissed Schuette’s warning that she would raise the gas tax by 20 cents as “ridiculous” and “nonsense.”
“How can you explain a 45-cent tax increase today?” Rep. Matt Maddock asked Whitmer’s budget director after pointing to her debate comments. The conservative Michigan Freedom Fund accused Whitmer of lying on the campaign trail.
Whitmer said it was not always her plan to seek so large of a tax hike, but once she took office she gained a “real appreciation” for how quickly the nation’s worst roads are deteriorating.
“We thought (a) user fee that is actually the right size to fix the problem was the way to go,” she told reporters while denying that she broke a campaign pledge. “My campaign promise was to fix the damn roads. This plan does that.”
Whitmer said her proposal would cost the average driver $23 a month, or $276 a year, but contended that motorists already are paying a “roads tax” for vehicle repairs caused by crumbling infrastructure. She proposed doubling the earned income tax credit for low-income residents, saving 750,000 families $30 a month, and repealing the so-called retirement tax on pension and other income — saving 400,000 households $65 per month.
Those components drew mixed reaction from legislators, while small-business groups denounced her plan to boost taxes on 150,000 S corporations, partnerships and limited liability companies.
Michigan now has the 9th-highest combined local, state and federal gas taxes in the U.S., according to the American Petroleum Institute. Under Whitmer’s plan, it would have the highest taxes, easily surpassing states like Pennsylvania and California.
Michigan is among a small number of states to apply the sales tax to motor fuel, but that revenue mostly goes to schools and local governments under the state constitution. In response to Whitmer’s proposal, Republican House Speaker Lee Chatfield renewed his call for ensuring that “every penny” paid at the pump is devoted to roadwork.
“We can’t continue to gloss over the long-term structural problem, while asking families, workers and seniors who are already living paycheck to paycheck to pay even more,” he said in a statement.
Whitmer did propose no longer diverting hundreds of millions in general funds to the transportation budget, saying it should go to universities.
She also outlined a $507 million boost in K-12 spending for the next fiscal year, including extra funding to teach at-risk, special education, and career and technical students. She also wants to make more 4-year-olds eligible for publicly-funded preschool.
A separate proposal for the current fiscal year includes a $120 million infusion to improve drinking water infrastructure in the state where Flint’s crisis occurred and $60 million to install hydration stations in schools.
Michigan Chamber of Commerce President and CEO Rich Studley, whose group has sway with GOP legislators, commended Whitmer and said he was prepared to support a “meaningful increase in user fees phased in over time.”
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Opinion: Northam’s RGGI Move Would Add Injury to Insult
By Lindsey Stroud
Virginia governor Ralph Northam is a lucky guy. While he’s busy wiping the egg off his face allegedly for racial misbehavior committed decades ago, the disgraced chief executive has a big distraction at hand: he is pushing a proposal to cut carbon-dioxide emissions radically in the state.
Northam is threatening to veto legislation recently passed by the General Assembly that would require a two-thirds’ majority vote from the Assembly and Senate to allow the Commonwealth to join the Regional Greenhouse Gas Initiative (RGGI). Virginia’s participation in the program would disproportionately harm the very low-income minorities the governor is currently attempting to mollify.
RGGI, established in 2009, is an interstate cap-and-trade program made up of the New England states plus Delaware, Maryland, New Jersey and New York. Cap-and-trade programs limit carbon-dioxide emissions by establishing a specific amount of the life-sustaining gas a business or other organization may produce and allowing additional capacity to be bought from other organizations that have not used their full production allowance.
If the true intent of the RGGI is to reduce emissions, the initiative has been a failure. A 2018 Cato Journal article found “no added reductions in CO2 emissions, or associated health benefits from the RGGI program.”
Virginia’s participation in the RGGI would force residents to pay more for their electricity. Virginia’s State Corporation Commission estimated the state’s participation in the RGGI could cost Dominion Energy Virginia ratepayers between $3.3 billion and $5.9 billion over the first decade, increasing the average electricity bill by $7 to $12 per month. Data from the U.S. Energy Information Administration indicate electricity prices in the 10 RGGI states are currently 39 percent higher than the U.S. average, whereas in Virginia they are currently 12 percent lower than average. As of February 2018, residential electricity rates for Dominion Energy’s customers were 32 percent below the RGGI state averages, the utility reports.
Cap-and-trade programs are essentially regressive taxes, hitting lower-income people disproportionately. Although Virginia’s inclusion in the RGGI will initially impose its costs on businesses, these will quickly be shifted to the consumers, functioning as a new tax on utility payers in the commonwealth.
The National Bureau of Economic Research finds cap-and-trade programs hit the poor by far the hardest: “Households in the lowest fifth of the income distribution could shoulder a relative burden that is 1.4 to 4 times higher than that of households in the top fifth of the income distribution.”
Stanford University found cap-and-trade programs and carbon taxes are regressive by nature “because polluting goods are mostly energy-intensive and take up a large percentage of a low-income person’s budget.”
Disparities among energy costs aren’t limited to the comparison between low- and high-income households. Energy Efficiency for All found African-Americans spend an above-average percentage of their income on energy, with African-American households suffering under a “median energy burden 64 percent greater than white households.” African-Americans and Latinos also pay “more for utilities per square foot than the average household,” the study found.
As the U.S. Energy Information Administration reported in September 2018, “Nearly one-third of U.S. households (31 percent) reported facing a challenge in paying energy bills or sustaining adequate heating and cooling in their homes in 2015.” It makes no sense for elected officials to force consumers to pay even more by imposing egregious cap-and-trade initiatives.
A governor who is desperate to save face should not put forth proposals that disproportionately harm minorities. Although Northam has allowed for a public comment period, there has been little publicity regarding this enormously important proposal.
Should Virginians not speak up, low-income minorities will have to face the fact that their governor has not only insulted them but now wants to force them to dig deeper into their pockets by terminating legislation meant to protect them.
ABOUT THE WRITER
Lindsey Stroud is a state government relations manager with The Heartland Institute. She wrote this for InsideSources.com.
Opinion: Pipeline Vandals Risk Catastrophic Outcomes
By James “Spider” Marks
More than two years have passed since Jessica Reznicek and Ruby Montoya admitted to deliberately causing millions of dollars in damage to the Dakota Access Pipeline. The duo said they “never threatened human life nor personal property,” while ironically confessing to numerous acts of sabotage, including setting fire to heavy construction equipment and using a blowtorch to burn holes in exposed sections of the pipeline.
During the months that followed, Reznicek and Montoya attained celebrity status through interviews and a speaking tour.
Unfortunately, this alarming story is not isolated.
Over the last several years, activists have demonstrated an increasing willingness to abandon the virtues of civil disobedience for a more aggressive set of tactics.
Deliberately tampering with or destroying critical infrastructure is not a form of protest. These are reckless criminal acts that endanger the lives of others and could disturb our natural environment.
While eco-extremists claim to be “saving the planet,” the reality is they are doing far more harm than good. In fact, recent history shows firsthand how severe the consequences can be when direct action is taken against critical infrastructure.
Take for instance the tragic events that unfolded in Mexico last month when vandals illegally tapped into a pipeline, triggering an explosion that killed at least 114 and injured many more. Meanwhile, communities in northern Canada lived in state of fear for much of 2008 and 2009 as eco-extremists carried out a series of bombings targeting natural gas pipeline infrastructure.
Thankfully, a disaster of this magnitude has so far been avoided in the United States … so far. The acts carried out against the Dakota Access Pipeline could have ended far differently had there been oil flowing through the pipe when the attacks occurred.
Likewise, the outcome of a recent incident in northern Minnesota could have been devastating had pipeline operators and emergency responders not acted so swiftly.
The activist group, known as the Four Necessity Valve Turners, said it acted in “celebration for the beauty of the earth” when it broke into a secure facility and attempted to close the valves controlling the flow of oil through several pipelines.
This follows a coordinated attack in 2016 during which vandals aligned with the Climate Disobedience Center simultaneously closed valves on multiple pipelines.
A security alert issued by the Pipeline and Hazardous Materials Safety Administration after the incident condemned activists for “creating the potential for serious infrastructure damage and significant economic and environmental harm, as well as endangering public safety.”
Equally alarming to these actions are the guerilla-style attacks targeting pipeline construction sites. Last month arsonists caused more than $500,000 in damage after they set fire to construction equipment at a Mountain Valley Pipeline worksite in Virginia. Meanwhile, eco-saboteurs targeted a Mariner East 2 pipeline construction site in Pennsylvania last year that also resulted in costly damage to heavy machinery.
The response to this illegal behavior — both in the media and in the courtroom — would be vastly different had the attacks been carried out by foreign-based terrorists. Instead, they are barely noticed. Perpetrators are lauded as heroes in the environmental community and afforded lenient punishments — many even have their charges dropped.
This is a disturbing trend, but thankfully policymakers across the country and in Washington are increasingly intolerant of this destructive behavior. The issue has received bipartisan support from federal lawmakers. In fact, a little over a year ago 84 members of Congress urged then-Attorney General Jeff Sessions to take a harder line with individuals who knowingly damaged pipelines.
The right to peacefully protest is foundational to our democracy and an important facet to driving participation in the public policy process. Sabotaging critical infrastructure is not a form of protest — it is an illegal act that should be prosecuted to the full extent of the law.
ABOUT THE WRITER
James “Spider” Marks is a retired U.S. Army major general and strategic adviser to the GAIN Coalition. He wrote this for InsideSources.com.
Analysis: Zero Taxes on Billions in Profits? Amazon’s Tax-Avoidance Scheme Provokes Furious Debate
By Michael Graham
When news broke last month that Amazon, the world’s third most valuable company, paid zero corporate federal income taxes in 2018 — for the second year in a row — economic populists like Sen. Bernie Sanders wasted no time in calling them out.
“Amazon made $16.8 billion in profits over the past two years but have paid ZERO in federal income taxes. In fact it got a $269 million tax refund. Our job: Demand large corporations pay their fair share in taxes so that we can rebuild the disappearing middle class,” Sanders tweeted.
His ideological ally Rep. Alexandria Ocasio-Cortez joined in, too: “Amazon is paying $0 in taxes on $11-plus billion in profit. $0 for schools. $0 for firefighters. $0 for infrastructure. $0 for research and healthcare. Why should corporations that contribute nothing to the pot be in a position to take billions from the public?”
And to millions of Americans digging through their shoebox of receipts this tax season, the idea of paying out on their meager earnings while the company paid nothing — and got $129 million back — sounds outrageous and even underhanded, especially following a widely publicized Amazon competition that led hundreds of local government officials to offer hundreds of millions of dollars in tax credits and other public subsidies to lure the company to open its second headquarters in their community.
But even if it is inconceivable to many Americans that a global behemoth like Amazon escaped with a tax bill of $0, interviews with multiple tax accountants and policy experts indicate that the company doesn’t appear to have crossed any legal lines, though critics are outraged that corporate accounting gimmicks like those used by Amazon reduce the revenues the government has to make kind of investments in education, transportation and research that make for a stronger economy.
The company’s extraordinary ability to make its tax liability vanish rests simply on its aggressive use of a Byzantine array of tax credits and special deductions, these experts say. In short, Amazon has played by the classic — if distasteful — rules of Washington under the leadership of Jeff Bezos, literally the wealthiest man in the world and one who has gradually made his presence felt in Washington in recent years, most notably with the purchase of the Washington Post.
As a result, critics contend that companies like Amazon have turned the tax code into a corporate handout of massive proportions that has helped it pad its profits. To these critics, such tax-avoidance schemes do little to serve the interest of the American taxpayer, especially since they ultimately starve the government treasury.
“My reaction is that this is another prime example of how Amazon does business,” said Robert B. Engel, chief spokesperson for the Free & Fair Markets Initiative, a corporate watchdog group that keeps a close eye on Amazon. “One of the richest companies in the world is doing something to abuse their power and avoid paying their fair share.”
The news about Amazon’s second successful year of tax avoidance has provoked a major debate among policymakers and experts who recognize that Amazon’s case has raised both political and policy questions about elements of the corporate tax code.
While not blessing Amazon’s tax practices, some experts say that the company is merely playing the tax-avoidance game nimbly, using precisely what the law allows.
“The only people who know exactly how Amazon structured its tax liability are the people who’ve seen their returns,” says tax policy expert Ryan Ellis. “But based on the available information, (Amazon) is doing pretty vanilla stuff. Any first year H&R Block associate could get Amazon what they got.”
“Amazon owed no taxes in 2018 because they deducted research-and-development costs, investment costs, losses from previous years, and employee compensation. They used no loophole,” said Alexander Hendrie, director of tax policy at Americans for Tax Reform.
If not a “loophole,” how did they do it?
“There are a lot of moving pieces that explain it all, but for Amazon there were three big factors,” says professor Arthur Reed, director of the prestigious Accounting Center for Electronic Learning and Business Measurement (ACELAB) at Bentley University in Massachusetts.
“One is the research and development credit. Another is stock-based compensation which allows a deduction for the simple increase in value of Amazon’s stock.
Salaries are “capped” at $1 million per year for tax purposes, but business may provide incentive compensation structures based upon profit, growth, etc. They basically can deduct the increase in value. This is where there is some creative thinking and planning,” Reed said.
“And third, companies can use the new bonus depreciation (under the recently-passed tax reform law) where they can deduct the cost of capital assets that they would normally have to deduct over many years. This is called bonus depreciation.”
Add it all together and you have a way to pay no federal corporate income taxes on a huge amount of money that is, Reed says, completely legal. Not everyone agrees.
“Amazon as a company is unique in that their business model is based on gaming the system,” Engel said. “When an organization like Amazon makes $11.3 billion and gets $129 million back, it’s a strategy. Amazon is an organization that we’ve seen is obsessed with beating the system.”
“There’s an old saying that ‘there’s no wrong time to do the right thing?’ Well, in Amazon’s world, there is no wrong time to do the wrong thing,” Engel says.
You’ll hear a similar sentiment from Matt Gardner of the Institute on Taxation and Economic Policy, the organization that first issued the report on Amazon’s net-zero federal corporate tax bill.
“Amazon is a company built on tax avoidance,” Gardner said. “I’m a state policy guy and that’s where I first saw Amazon’s involvement in tax policy. In the late 1990s when he was basically in the book-selling business, Jeff Bezos picked Seattle for the company’s headquarters, as opposed to a tech-friendly community like San Francisco. Why?
“Because Washington state has no corporate income tax,” Gardner says. “And then Bezos used the fact that he could sell in many states without collecting sales tax as a business advantage.”
According to Gardner, Bezos sees tax policy as a fundamental part of Amazon’s competitive advantage. “None of it is illegal, just as the (now-defunct) HQ2 strategy for Long Island City, N.Y., wasn’t illegal.”
And the fact that it’s all perfectly legal, Amazon’s defenders say, is the point. Congress has put these tax policies in place because they believe it’s a benefit to the nation’s overall economy for companies to operate under them.
“Amazon is investing in research and development. They’re putting their profits back into the business to create future growth, they’re not just paying off the shareholders for a quick profit. Isn’t that what we want companies to do?” asked Ellis.
“This isn’t just about Amazon,” says Adam Michel of the conservative Heritage Foundation. “Any business, not just big ones like Amazon or Netflix, that is growing quickly and is investing a lot in research and development will pay significantly lower taxes. A lot of small startup businesses don’t pay corporate income taxes because they’re carrying forward operating losses from past years.
“We can have a policy discussion about the research and development tax credit and whether or not it’s good policy, but the idea that Amazon will never pay taxes is just not true.”
And, in fact, a 2017 report by the New York Times found that from 2007 to 2015, Amazon paid federal income taxes year after year, with an average annual rate of 13 percent in total federal state, local and international taxes. Interestingly, that rate is well below that 27 percent average tax rate among S&P 500 companies. Does that fact reflect Amazon‘s “tax policy as competitive advantage” approach?
ABOUT THE WRITER
Michael Graham is political editor at InsideSources.