Tag Archives: ncpa

Doctors Not Excited About Affordable Care Act

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Ask the professionals in the middle of federal health care reform their opinions about the future impacts and the answers are downright scary. In a new survey, doctors fear both short-term and long-term declines in the quality of care, while costs will only continue to increase. The National Center for Policy Analysis concludes:

America’s doctors have conducted a full examination of the president’s health reform law, assessing it in a number of variables, and have concluded that it will fail to live up to many expectations and will aggregately hurt consumers in the short and long runs.  Few people know more about the health care system than doctors working on the frontlines.

Policymakers should pay heed to their indictment of the Affordable Care Act and revisit the disastrous law, says Sally Pipes, president and CEO of the Pacific Research Institute.

• Nearly two-thirds of doctors expect the quality of care in this country to decline, according to a new survey from Deloitte.
• Nearly seven of every 10 doctors believe that medicine is no longer attractive to America’s "best and brightest."
• Seventy percent of doctors believe that long wait times will plague emergency rooms.
• Further, 83 percent of physicians foresee increased wait times for primary care appointments.

And doctors did not stop at criticizing the quality of care that health reform will deliver — they also addressed its likely impacts on the cost of health care.

• While Obama pledged $2,500 in health insurance savings for the typical American family, 90 percent of doctors believe that insurers will raise premiums for employers and individuals.
• This argument is supported by the non-partisan Congressional Budget Office (CBO), which estimates that premiums will actually rise for families in the non-group market by about $2,100.
• Richard Foster, the Chief Actuary of the Centers for Medicare and Medicaid Services, concluded that American spending on health care through 2019 will be $311 billion higher than if the law had never passed.

Many of these results stem from two large impacts of the law: shutting down health care facilities and sharply increasing demand as it extends coverage to millions of people.  Doctors respond to this latter "benefit" by pointing out that coverage counts for little if patients are unable to see doctors due to increased demand.

Business Tax Advantage Goes to Canada, Others

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Some in Indiana and beyond are acknowledging that high corporate tax rates are putting American businesses at a competitive disadvantage. Canada is the latest to institute a cut, joining various Asian and European nations with rates that are less than half of the U.S. federal rate of 35 percent. The National Center for Policy Analysis summarizes a Wall Street Journal article:

It was not long ago that Americans viewed Canada as a poorer neighbor with only one competitive advantage — in hockey.  No more: On January 1, Ottawa cut the nation’s corporate tax rate to 16.5 percent from 18 percent, compared to the U.S. federal rate of 35 percent, reports the Wall Street Journal.

Canada started cutting corporate taxes in the 1990s under the Liberal government of Paul Martin and has since enjoyed a virtuous cycle of investment, job creation and growth.  The trend has continued under Conservative Prime Minister Stephen Harper, who has pledged to take the rate to 15 percent by 2012.  Even Canada’s Socialist-run provinces have followed suit by lightening the tax burden on business.  This is part of a global trend, as noted by a European Commission report.

  • The European Commission report last year noted that Europe’s average corporate tax rate has dropped below 25 percent.

  • By contrast, the U.S. rate is close to 40 percent if you add state corporate taxes to the federal levy.

Relative levels of taxation matter because companies and investors send capital where it can achieve the highest returns.  U.S. companies often pay a lower effective tax rate thanks to loopholes, but the variability leads to economic inefficiency and investment distortions.  Low marginal rates have helped the likes of Hong Kong (16.5 percent), Singapore (17 percent) and Ireland (12.5 percent) attract capital, while the high U.S. rate keeps hundreds of billions of dollars from coming to America from offshore, says the Journal.

Trade Ya!

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One of the more positive recent federal developments was the signal that pending free trade agreements may be resurrected. Such deals are in place with South Korea, Colombia and Panama, with approval of the South Korea pact a logical place to start to boost a number of U.S. industries. The National Center for Policy Analysis offers:

The trade pact between the United States and South Korea, which would eliminate about 95 percent of tariffs on industrial and consumer goods within five years, has the usual advantages in promoting job-creating exports.  It would help domestic industries involved in telecommunications, technology, pharmaceuticals, farming and financial services gain access to an important market, say USA Today.

Even American manufacturing, a usual source of opposition to these types of deals, should have reasons to like this one. 

  • South Korea is a highly developed and educated nation with average wages approaching those in the United States and environmental standards that, in some cases, are more stringent.
  • What’s more, U.S. manufacturing, after decades of technology-driven productivity gains and related job losses, is highly competitive and showing signs of a rebound.
  • In large part this is a result of exports, which are healthy even as domestic consumption lags.

Another argument for the trade deal with South Korea is not economic but geopolitical.  A vibrant and prosperous South Korea is a check against the ambitions of the bizarre and belligerent regime to its north, says USA Today.

Who knows, this pact could be a harbinger of things to come, as an overly indebted U.S. economy begins to focus more on investment and savings, and sees trade with fast-growing emerging nations in Asia and Latin America as something to support, not fear.  In any case, ratification of the South Korea deal should be high on the Senate’s agenda for 2011.

Business Owner: Entrepreneurs Stunted by Excessive Taxes

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Michael Whalen, policy chairman of the National Center for Policy Analysis and owner of a chain of restaurants and inns in Iowa, offers a personal anecdote about the struggles American entrepreneurs are facing — and he insinuates most elected officials have no clue about the impacts of the many taxes and charges placed upon business owners:

One of the properties my company owns is a 100-room limited-service hotel in Iowa. Let me talk about the taxes this one place pays.  I’ll use 2008 numbers.

For starters, we pay property taxes to the tune of about $199,000 annually.

Next, there is a 7 percent "pillow tax" that generates about $162,000 annually. Then we pay a 6 percent sales tax on revenue that yields about $124,000 annually. Then we also pay sales tax on things like toilet paper, shampoo, soap, continental breakfast food and amenities and other items that the state of Iowa says are not really part of the product we sell because it says we are selling space.  It may come as a surprise to you that toilet paper is not part of what you are buying when you rent a hotel room in Iowa, but the state considers it a gift. Those extra sales taxes come to about $1,800 per year.

Now on to Round 2. This little hotel also pays about $3,000 a year in various licenses and fees. Payroll taxes come to about $60,000. The federal government says the depreciable life of a hotel is 39.5 years, but we refurbish the hotel on a constant basis and pay sales tax on related purchases, such as new carpet, mattresses and bedding, and even paint. Anyone who does not believe we already have a partial value-added tax (VAT) like Europe, isn’t in business. Now, between Round 1 and Round 2, we are at $548,000 in taxes annually.

So, even if we don’t make a dime of profit, and before we pay the mortgage to the bank or buy new stuff, we pay $548,000 in various taxes, licenses and fees.

Round 3 is income taxes at the federal and state level.  I am not going to tell you these numbers, but I can tell you they can be substantial. Because the hotel is owned by a Subchapter S corporation, in which taxes are paid by shareholders rather than the corporation, the income is reported on my personal income-tax return even though it’s not really my personal money.   But President Obama and many in Congress think we don’t pay enough in taxes because we are "rich."

A few years back, I was telling this story of taxes on one little hotel to an important elected official. He replied, "You don’t pay those taxes, your customers do. I don’t get your point." I stood there dumbfounded and simply replied, "My customers pay all of our taxes? Where do you think money comes from?" I swear this is a true story.

I understand that most folks in state legislatures and Congress have never been in business, paid these taxes or met a payroll.  But I cite the experience of venerable pro-tax Sen. George McGovern, who went into the bed-and-breakfast business after he retired from the Senate. Unfortunately, he went bankrupt. When asked what this experience had taught him, he said that he would have voted a lot differently if he had been in business before going to Congress. He is an honest man.

Good News (Not a Trick, There Really Is Some Out There)

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It seems bad news abounds these days. Skyrocketing health care costs. Escalating deficits. Reality television is still here. But it’s not all bad. The Colts are 12-0. The economy is due to pick up (any day now…). And hey, there’s at least a 65% chance you’re not one of Tiger Woods’ mistresses.

Even better, the National Center for Policy Analysis has summarized a post from The American illustrating there’s still hope for the old U.S. of A. Check it out:

According to a recent report from the Centers for Disease Control:

  • Life expectancy for Americans reached an all-time high of nearly 78 years (77.9) in 2007 (most recent data available), the age-adjusted death rate dropped to a new all-time low, and life expectancy for black males reached a new record of 70 years.
  • Compared to the life expectancy in 1929 of only 57.1 years, the average American today can expect to live almost 21 years longer.

According to the United States Department of Agriculture:

  • Food expenditures by families and individuals (both at home and at restaurants) as a share of disposable personal income reached an all-time record low of 9.6 percent in 2008.
  • Spending on food as a share of income was twice that high in the 1950s (average of 19.3 percent), and almost three times as high in the early 1930s.

According to data from the Energy Information Administration:

  • The energy consumption required (measured in thousands of British thermal units) to produce a real dollar of output (Gross Domestic Product) fell to an all-time record low of 8.52 in 2008.
  • Compared to 1970 when it took 18 Btus to produce a real dollar of GDP, today’s economy is more than twice as energy-efficient.

Proposed Federal ‘Solutions’ Could Pose Major Problems for Small Businesses

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The National Center for Policy Analysis analyzes how proposed attempts to help the country via more taxes and more regulation could punish America’s small businesses.

The  NCPA contends:

We need policies that encourage small-business owners to invest in their businesses, hire more people and continue to grow their businesses.  Unfortunately the administration’s proposal to raise taxes on those earning $250,000 or more will create burdens and barriers to small-business growth and success, says Neese:

  • Under those new tax plans, 1.3 million small-business owners would pay more taxes.
  • These small businesses are not subject to the 35 percent corporate income tax rate.
  • Instead, they report "flow-through" income from sole-proprietorships, partnerships, and S-corporations on individual tax returns.
  • The total tax bill for small businesses as a result of these tax increases would be $30.1 billion.

If this small-business tax increase becomes reality, many small-business owners will not be able to expand their businesses.  Not only will they not be able to hire more people, in many instances they will be forced to lay off workers.  They won’t be able to buy new equipment.  They won’t be able to invest in their communities, says Neese.

At the National Center for Policy Analysis, we have been working on some solutions that can encourage success now:

  • Make income tax cuts permanent; for example, lower tax rates, especially at the margin, encourage work, investment and reduce tax avoidance.
  • Cut payroll taxes; taxes eat up one-third or more of a small business’s income — reducing the payroll tax will have an immediate impact on small businesses, enabling more investment to grow the business.
  • Health insurance portability; health insurance is a major expense for businesses, so Congress should allow people to carry their health insurance from job to job by allowing small-business owners the opportunity to purchase individually owned health insurance with pretax dollars.

Student Loans Based on Future Incomes: Can This Really Work?

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Here at the Chamber, we like to spend our days delving in theory (and by "we," I mean people who possess a greater cognitive capacity than I do). And this concept of human capital and student loans struck some of us as intriguing.

What if students repaid loans with a percentage of their future earnings? The National Center for Policy Analysis tackled the subject. Check out their analysis, which links to the original article in the Dallas Morning News by Rebecca Tuhus-Dubrow:

Originally the brainchild of Milton Friedman, human capital contracts are seen as a way to remove the risk of overwhelming debt for students and mitigate the social costs of trying to repay it.  By gearing repayment to income, the contracts reduce those burdens sharply — a student who earns less money is obligated to pay less back. 

The Pros:

The potentially lower payments explain why human capital contracts would draw students, but there’s an attraction for investors, as well, says Tuhus-Dubrow:

  • An education fund offers investors a steady flow, protection against inflation and a more targeted hedge for large employers.
  • Investors could be motivated by philanthropic goals: wealth alumni might see this as a way to help students attend their high-priced alma maters.
  • Foundations and schools could require students to sign contracts stating that nothing is owed up to a certain point, but high-earning graduates would repay a percentage of their income, allowing the foundation to recycle that money into later classes.

 The Cons:

However, for all the benefits, the contracts pose multiple challenges in practice, adds Tuhus-Dubrow:

  • They create an incentive for graduates to hide their income and make it easier for them to not work, since no fixed payment is required.
  • Adverse selection and discrimination against low-income students could cause problems.
  • Further, it’s not clear how the contracts would be enforced, how the IRS would treat them and what would happen in the case of bankruptcy.

Big Enough to Take It Away

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The National Center for Policy Analysis recently dissected a Human Events column from Terence P. Jeffrey about America’s need for smaller government. You can read the entire piece here, but here’s the NCPA’s synopsis:

Up until the 1930s, the United States maintained a small federal government that mostly focused on the limited number of things the Constitution authorized it to do.  Americans were responsible for their own food, clothing and shelter, and believed in earning wealth.  What changed?  Well, in the 1930s, we didn’t have a welfare state, says Terence Jeffrey, editor of Human Events.

According to the White House Office of Management and Budget (OMB), in 1930:

  • The federal government spent only 3.4 percent of gross domestic product, federal tax receipts equaled 4.2 percent of GDP and there was a federal budget surplus of 0.8 percent of GDP.

  • By 1940, with the election of Franklin Delano Roosevelt and his modern American welfare state, federal spending was 9.8 percent of GDP, federal tax receipts were 6.8 percent and the Treasury borrowed 3 percent of GDP to make up the difference.

  • The "human resources" part of the federal budget consumed 4.3 percent of GDP; in 2009, it will consume 13 percent. Continue reading →