Tag: TaxJusticeBlog

While Louisiana Governor Bobby Jindal has yet to lay out a specific tax plan in the run up to his presidential campaign announcement, he has fought to reduce taxes for the wealthy and corporations at the expense of everyone else. He outlined his vision in his 2013 plan that sought to eliminate the state’s income tax and replace it with revenue from an expanded sales tax, a reform that would dramatically cut taxes for the wealthy while increasing them for at the expense of low- and middle-income people.

Record as Governor of Louisiana

Just a few months into his first term in 2008, Gov. Jindal signed into law the largest tax cut package in Louisiana history. At the time, the state had a nearly $1 billion surplus.  But this additional revenue quickly deteriorated due to the tax cut and the state’s failure to rein in ever-growing tax expenditures, such as the state’s expensive and wasteful film tax credit program. By 2015, the state faced a budget gap of $1.6 billion, even after years of harsh budget cuts across the state and the depletion of the state’s rainy day funds.

Despite the collapse of the state’s fiscal situation, Gov. Jindal stuck to Grover Norquist’s no-tax pledge, which requires politicians to never raise a penny in new tax revenue. The spending cuts that would have been needed to close the state’s 2015 budget gap, however, were so large that legislators insisted that raising tax revenue was necessary. Given his national ambitions, Gov. Jindal craftily structured his response so that he could increase tax revenues without technically violating the no-tax-pledge popular among many primary voters.

How can a governor raise taxes without violating the no-tax pledge? Gov. Jindal’s created a Rube Goldberg-like budget gimmick. Gov. Jindal passed a massive increase in college fees, which he then exactly offset with a new tax credit, resulting in no actual increase in cost for students. Because college “fee” increases do not technically count as a “tax” under Norquist’s formula, Gov. Jindal could claim that the tax credit half of his plan was a substantial new tax cut. Gov. Jindal could then sign an increase in actual taxes (including cigarette taxes and other levies) without violating the pledge under the dubious claim that the “tax” portion of this package was revenue-neutral. The tax increase piece of the package includes a substantial increase in the state’s cigarette tax, an annual cap of $180 million on the film tax credit and a series of smaller temporary revenue measures.

Putting aside Gov. Jindal’s budget shenanigans, the governor also has a history of trying to make Louisiana’s already regressive tax system even more so. In 2013, Gov. Jindal pushed to replace the state’s personal and corporate income taxes with an expanded sales tax. According to an analysis by the Institute on Taxation and Economic Policy (ITEP), the governor’s plan would have significantly increased taxes on the bottom 80 percent of Louisianans, while at the same time giving the top 1 percent of Louisianans an average tax break of $25,423 annually. Fortunately, Gov. Jindal’s plan quickly collapsed as the data on the unfairness of the plan spread throughout the state.

Record on Federal Tax Issues

Gov. Jindal’s support for deficit-inducing tax cuts for the rich on the state level mirrors his support for such policies at the federal level. During his campaign for Congress in 2004, Gov. Jindal advocated for making the Bush tax cuts permanent. As a member of Congress, Gov. Jindal voted for Bush’s extension of a preferential tax rate on capital gains and dividend income and for a permanent repeal of the estate tax, two of the most regressive aspects of the Bush tax cut package.

The closest that Gov. Jindal has come so far to laying out his vision for federal tax reform overall came in 2012 when he voiced his support for former Texas Gov. Rick Perry’s flat tax plan, which would have blown a $10.5 trillion hole in the budget over ten years and provided the richest one percent of taxpayers an average annual tax cut of over $272,000.

While Gov. Jindal has not yet laid out a specific tax reform plan as part of his newly launched presidential campaign, he has clearly demonstrated his support for regressive and fiscally imprudent tax cuts at the state and federal level.

Last year at this time, more than a dozen U.S.-based corporations were threatening to move their legal residence to foreign tax havens in a paper transaction known as an inversion. Facing a wave of public opposition, some corporations abandoned these inversion attempts—notably, drugstore chain Walgreens put its plans on ice, and Pfizer could not  complete its inversion—but other corporations succeeded in shifting their corporate addresses abroad to avoid U.S. taxes.

One of these companies, the generic drug maker Mylan, successfully merged with a foreign branch of Abbott Laboratories earlier this year to form a Netherlands-based company, also named Mylan. The company’s CEO made it clear that the prospect of paying an income tax rate “in the high teens” to its new Dutch homeland was a big driver in this decision.

Now the company is facing an unwanted hostile takeover bid from Teva Pharmaceuticals, and it has suddenly rekindled its love affair with Uncle Sam, or at least with the regulatory protections the U.S. government provides. Turns out that if Teva Pharmaceuticals had launched such a takeover a year ago at this time when Mylan still had a U.S. passport, the anti-trust division of the Federal Trade Commission (FTC) would have had to okay the deal for it to go forward. It now appears that the FTC is content to allow Mylan’s new Dutch benefactors to oversee the process. But Mylan’s leadership is now realizing, too late, that the FTC’s oversight authority could be pretty helpful.

Mylan’s leadership admitted last year that it was shifting its headquarters to the Netherlands for tax purposes, but now they are saying with a straight face that they’d actually like to remain American citizens in ways that don’t subject them to the U.S. corporate tax structure. They also really think there shouldn’t be any hard feelings. “We know the inversion has invoked a lot of emotional and political banter but the reality is we remain a U.S. issuer under all of the formal and informal guidelines,”  Mylan’s CEO Heather Bresch said earlier this week in a Bloomberg news report.

Unintentionally admitting that its inversion was a farce simply for tax purposes, Mylan argued that “it should pass the test of being treated like an American company under federal regulations because its principal offices are in Canonsburg, Pennsylvania,” Bloomberg reported.

Even before Mylan renounced its U.S. citizenship, it was hardly a model taxpayer: a 2014 Citizens for Tax Justice analysis found that Mylan had 40 tax haven subsidiaries, from Bermuda to Switzerland, and was holding $310 million in profits offshore for tax purposes—income on which the company may have paid little or no tax to any country.

In years to come, Mylan’s leaders will hopefully discover the many joys of their new Dutch identity. But, like any other company that chooses to engage in chicanery to avoid U.S. taxes, Mylan should not expect access to the full legal protections offered by the U.S. government.

Moreover, Mylan’s inadvertent admission that its primary operations are still in the United States underscores the need for Congress to act to prevent corporations from changing their corporate addresses simply to dodge U.S. taxes.

In a textbook example of a silver lining, working families in Colorado could see an Earned Income Tax Credit (EITC) enacted this year thanks in part to the state’s Taxpayer’s Bill of Rights (TABOR). Enacted in 1992, TABOR limits the amount of revenue that the state and local governments can collect and spend. Any revenue over the TABOR limit must be sent back to taxpayers through a complex set of formulas. While TABOR is inflexible and prevents the state government from responding effectively to crises, in this case it has worked to the benefit of Coloradans near the bottom of the income scale. Once the state EITC is triggered as a TABOR rebate, it becomes a permanent tax credit set at 10 percent of the federal level. The EITC will benefit 300,000 working families in the state and boost 75,000 individuals – half of them children – out of poverty.

States all along the East Coast are competing for a slice of the yacht business through hefty sales tax breaks, as reported in The Washington Post. New York recently passed a law limiting sales taxes on yacht purchases to $20,000 to counter Florida’s 2010 sales tax limit of $18,000. (For context, an owner purchasing a $2 million yacht would save $150,000 in taxes under New York law.) Florida struck back at New York by adopting a $60,000 sales tax limit on yacht repairs, and New Jersey copied their rival to the north by adopting the same $20,000 limit on purchases. While such sales tax breaks are usually justified as protecting the jobs of yacht builders, in reality the primary beneficiaries are yacht owners. As ITEP’s Matt Gardner notes in the article, “It’s just a deluded approach to tax policy to say that you have to exempt these transactions or else they will move elsewhere.” 

Lawmakers in Washington are facing a budget impasse ahead of their July 1 deadline. Initially, House lawmakers sought to levy a state capital gains tax on investors who earn more than $25,000 a year from investments. But the House dropped that plan this week when the state Senate refused to pass a new tax but indicated a willingness to get rid of some tax exemptions. Lawmakers have a little over a week left to agree on the budget before the state government begins a partial shutdown.

California lawmakers reached a deal with Gov. Jerry Brown, passing a $115.4 billion budget that includes a new EITC for working families. This new EITC is worth approximately $380 million and is expected to help 2 million Californians. 

Billionaire businessman, television personality and now presidential candidate Donald Trump is the latest candidate to jump into the race. He has made a number of tax proposals. His more recent proposals, in contrast to ones he proposed back around the 2000 election, would likely sharply increase the national debt and make the U.S. tax system substantially more regressive by both cutting taxes for the rich and creating a massive new tax that would disproportionately hurt lower-income Americans.

What exactly are Trump’s tax plans? The most recent detailed plan that Trump has offered is contained within his 2011 book, Time to Get Tough. His five-step plan includes eliminating the estate tax and the corporate income tax, lowering the tax rate on capital gains and dividends, enacting a 20 percent tariff on all imported goods and creating a new, lower income tax rate structure. The income tax would include a tax rate structure of 1 percent for up to $30,000; 5 percent for $30,000-$100,000; 10 percent for $100,000-$1,000,000; and 15 percent for income over $1,000,000.

As Citizens for Tax Justice (CTJ) has shown, the benefits of eliminating both the estate and corporate tax and lowering the capital gains tax rate would go overwhelming to the wealthiest Americans. In addition, the lower tax rate structure would provide the wealthy with huge tax cuts on top of the already large tax breaks just mentioned.

Of the five planks, the only one that would potentially raise revenue is Trump’s proposal to place a 20 percent tariff on all imported goods. This proposal is very much in line with 19th century tax policy in America, in which the federal government got most of its revenue from high-rate tariffs. Fortunately, high-rate tariffs have become a thing of the past thanks to the efforts of progressive reformers, who recognized both the regressive impact of the tariff (consumers end up bearing most of the burden) as well as the economic damage that high-rate tariffs cause by disrupting trade between nations. The idea of imposing such a high-rate tariff today would fly in the face of 100 years of economic progress and would violate the many treaties that have reduced tariffs at our instigation. The economic costs would likely be very substantial.

Taken together, these five proposals would also create a multi-trillion dollar hole in the federal budget that Trump has not outlined any substantial plan to fill.

While Trump has not specified a new tax plan in the run-up to his 2016 candidacy, he has indicated that he supports a flat tax and the so-called “Fair Tax” (a national sales tax). If Trump ends up proposing a flat tax, he would not be alone considering that other presidential candidate supporters of a flat tax include Gov. Rick Perry, Sen. Ted Cruz, Sen. Rand Paul, Ben Carson, Sen. Lindsey Graham and yet to announce candidate Gov. John Kasich, while the national sales tax is supported by both Mike Huckabee and Sen. Cruz. If enacted in a revenue-neutral way, both the Fair Tax and a flat tax would likely cut taxes on the wealthiest American by an average of over $200,000, while significantly increasing taxes on the vast majority of Americans.

The oddest thing about Trump’s recent support for a flat tax is that it represents a significant reversal from his previously stated opposition to a flat tax. During the 2000 election Trump released a book, titled The America We Deserve, in which he explicitly rejected the flat tax. He said that a flat tax would be “unfair to the poor,” who would be forced to pay more in taxes due in part to the repeal of the earned income tax credit. He also said that it would be unfair to allow the wealthy to get away with not paying any taxes on income from dividends, capital gains and interest.

Instead of a flat tax or a series of regressive proposals, the major tax proposal that Trump made during the 2000 election was a one-time 14.25 percent wealth tax on individuals and trusts with a net worth over $10 million, which he proposed to use to eliminate the national debt. Putting aside the debate over the administration and constitutionality of a wealth tax, Trump defended his proposal on equity grounds, writing that while some might argue that his plan is “unfair to the extremely wealthy,” he believed that “it is only reasonable to shift the burden to those most able to pay.” In other words, Trump actually made the case for a progressive tax proposal during the 2000 election, in stark contrast to his latest tax proposals.

One last notable discontinuity between Trump’s latest tax positions and the proposals he made in 2000 is the fact that he proposed the creation of a $3,000 annual tax credit for individuals that purchase health insurance (outside of employer-subsidized health insurance). While the details differ, Trump’s health insurance tax credit is broadly in line with Obamacare’s health insurance premium tax credits, which coincidently provide an average annual benefit of just over $3,000 to those who qualify. The discontinuity at play here is the fact that Trump has also called for the complete repeal of Obamacare in his latest book, without mentioning that the bulk of what he would repeal is similar to his own previous tax proposal to make healthcare more affordable.

Given his recent musings on a flat tax and a national sales tax, it’s likely that Trump will use his current presidential campaign to push for regressive tax changes. Whether it’s a flat tax, some version of his tax plan from 2011, or some new and wacky plan remains to be seen. 

Since Sen. Rand Paul (R-KY) announced the broad outlines of his plan for restructuring the federal tax system yesterday, a number of research groups have weighed in on the question of how Paul’s proposed Value Added Tax (VAT) would work—and, critically, how much revenue such a tax could raise. This question is of vital importance in evaluating Paul’s plan because if his tax cuts add huge amounts to the budget deficit, there’s no way he will be able to keep his campaign promise to balance the federal budget.

Yesterday, a CTJ blog post estimated that Paul’s VAT would likely raise about $1.1 trillion a year if fully implemented in 2016—far below the $2.3 trillion in annual tax cuts that would result from other components of Paul’s plan. We estimated that this would translate into a $1.2 trillion revenue loss in the first year—and a $15 trillion budgetary hole over the next decade. 

The rightwing Tax Foundation has since claimed that CTJ understated the revenues that Rand Paul’s VAT would raise by a huge amount, citing a 2012 analysis from the Tax Policy Center (TPC) for support. The Tax Foundation specifically claims that a VAT could actually raise about $2 trillion a year, far above our $1.1 trillion estimate. But a closer examination of the Tax Policy Center’s VAT analysis proves just the opposite.

According to the Tax Foundation, Senator Paul’s VAT would include government spending in the VAT base. But the TPC analysis points out the obvious absurdity of this: “inclusion of government in the tax base has no effect on real federal spending or deficits. At the federal level, the government is simply paying tax to itself.” The TPC goes on to add that taxing state and local governments under a VAT would also have to be offset by federal rebates so that those taxes can’t plausibly be counted as new revenue either.

TPC estimates that sensibly removing these phantom taxes reduces the VAT base by almost a quarter. Put another way, ending this shell game reduces the annual yield of Sen. Paul’s VAT from the Tax Foundation’s $2 trillion estimate to about $1.5 trillion.

Moving beyond the cheap parlor trick of government paying taxes to itself, the next question is whether it is politically feasible to tax every element of personal consumption. An analysis from the Congressional Budget Office (CBO) weighs in on this question. CBO’s analysis showed what a VAT might raise if private spending on health care, education, and religion  were excluded from the VAT base, as is commonly the case with existing European VATs and sales taxes in the United States. That, plus some other differences between CBO’s analysis and TPC’s, meant that the CBO’s plausible VAT base clocked in at just 61 percent of total NIPA personal consumption.

We used CBO’s 61 percent figure in calculating the tax base and potential revenue from a plausible VAT. Had we used an implausible 75 percent figure, our results would not have changed much—the Paul plan would still cost about $1 trillion per year or $12 trillion over a decade.

The main difference between our analysis and the Tax Foundation’s is that the Tax Foundation is prepared to pretend that the government paying taxes to itself would be a huge revenue raiser. Alas, that’s simply not true.

For more on this odd idea, see: https://ctj.sfo2.digitaloceanspaces.com/pdf/fairtax1998.pdf

As a presidential candidate running for the Democratic nomination in 2016, Lincoln Chafee has yet to lay out a vision on tax issues, so the only indications so far of what his positions may be lie within his record as a former U.S. Senator and Governor in Rhode Island. And the evidence suggests that Chafee largely supported fiscally responsible tax policies, even when such positions were unpopular among his fellow lawmakers.

While representing Rhode Island in the U.S. Senate, Chafee was one of the few Republicans to consistently vote against the fiscally irresponsible and regressive Bush tax cuts. A congressional report card by Citizens for Tax Justice (CTJ) gave Chafee a “B,” the highest grade earned by any Senate Republican and a grade higher than many Senate Democrats earned, for his four votes against the Bush tax cuts. In fact, his votes on the Bush tax cuts line up exactly with his fellow presidential aspirant Hillary Clinton. The one vote that prevented both Chafee and Clinton from earning an “A” was their vote, along with 67 other senators, for the American Jobs Creation Act, which infamously included a disastrous repatriation holiday.

Rather than run away from his opposition to the Bush tax cuts, Chafee has highlighted in recent days the fiscal irresponsibility of the cuts, noting how hard it had been to win the fiscal surpluses of the late 1990s and how the Bush tax cuts reversed the revenue increases necessary to create them.

During his first two years as Rhode Island governor (Chafee was elected as an Independent and then became a Democrat in 2012), Chafee stood out as one of the few state executives willing to call for revenue increases to counter shortfalls stemming from the recession. Specifically, Chafee fought for a sales tax reform package that would have expanded the tax to a host of exempt services and products and filled half of the state’s budget gap. Unfortunately, Rhode Island legislators substantially scaled back his package, applying the sales tax to only five additional items and raising only $30 million in new revenue through the reform.

Another notable reform Chafee enacted was the passage of a law requiring Rhode Island’s state analysts to evaluate the impact of the state’s economic development tax breaks. The issue was that Rhode Island, along with a host of other states, did not require any sort of analysis as to whether its costly economic development tax incentives actually produced results in terms of jobs and economic growth. The new law helps lawmakers decide whether they should continue the breaks or opt to spend the money on other priorities.

In the last year of his term Chafee allowed the passage of a tax reform package that had regressive elements to it, though he was not the architect of the policy. The reform increased the state’s estate tax exemption from $921,655 to $1.5 million, providing a significant tax break to a very small subset of the wealthiest estates. Worse, the reform eliminated the state’s property tax circuit breaker for the non-elderly and non-disabled, which provided critical assistance to many low-income homeowners and renters to help offset the regressive impact of property taxes. Additionally, the state’s earned income tax credit (EITC) was converted from a partially refundable credit to a fully refundable credit at 10% of the federal EITC, which boosted the value of the credit for low-income households while at the same time scaling back the credit for moderate-income families who do not benefit from the refundability. On the positive side, the tax reform package did include the enactment of combined reporting and a net increase in revenue from corporate taxes.

Chafee has largely stood up against fiscally irresponsible tax cuts, and hopefully he will bring this stance to bear in tax policy discussions during his presidential campaign. 

Wisconsin lawmakers are considering eliminating the state’s Alternative Minimum Tax (AMT), a move that would send tax breaks to the rich and nothing to more than 80 percent of Wisconsinites. The AMT is meant to ensure that wealthy individuals pay a minimum level of income tax, and is therefore assessed at higher incomes. Ironically, as state lawmakers and Gov. Scott Walker slashed top marginal income tax rates for the wealthy, more of these taxpayers were subjected to the AMT. The proposal to eliminate the tax would cost more than $27 million annually in lost revenue.

The Rhode Island House of Representatives unanimously approved the 2016 budget deal on Tuesday night, sending the measure to the Senate Finance Committee for consideration. The unanimous approval cleared the House by 7:30pm, and has been touted as the quickest budget vote in at least 30 years. The $8.7 billion bill exempts Social Security income from the personal income tax for Rhode Islanders over 65 if their income is below $80,000 (single) or $100,000 (married) – a change that will benefit mostly wealthy retirees, as we’ve argued before. The plan also phases out sales taxes on utility bills for non-manufacturing businesses. On a positive note, the budget increases the states refundable Earned Income Tax Credit (EITC), a tax break for working families, from 10 to 12.5 percent.

The Florida Legislature approved a $400 million package of tax cuts on Monday, and Gov. Rick Scott is expected to sign the measure even though it reduces taxes by less than he wanted. Passage of the measure comes after the resolution of a deadlock over healthcare spending; Florida is expected to lose federal aid to state hospitals, and many lawmakers were reluctant to accept Medicaid dollars offered under the Affordable Care Act. In the end, the size of the tax cuts relative to what Scott proposed was reduced by almost half in order to cover healthcare costs. The package of cuts includes tax cuts for cellphone purchases and cable bills, college textbooks, and sailboat repairs that cost more than $60,000.

As the summer travel season heats up, lawmakers in states across the country are mulling gas tax increases as a way to boost road construction and maintenance budgets. Tennessee Gov. Bill Haslam plans to barnstorm the state to stress the need for more transportation funding, though he’s stopped short of endorsing a gas tax increase. Tennessee’s gas tax hasn’t risen in decades, and the average motorist there is paying a third less per mile for roads than a generation ago. An editorial in The New York Times, meanwhile, argues that New Jersey lawmakers must raise their state gas tax to pay for crumbling roads. At 14.5 cents a gallon, the state tax is less than a third of New York’s tax and trails Pennsylvania and Connecticut by similar margins. Meanwhile, New Jersey has 577 structurally deficient bridges and 300,000 potholes. Efforts to increase state gas taxes also received a boost from a recent study that finds gas tax increases do not result in penny-to-penny increases in the price that motorists pay at the pump.

A Delaware House committee will consider a bill that would make their income tax rate structure more progressive. Currently, the top personal income tax rate is 6.6 percent for income above $60,000. The new proposal would institute a rate of 7.1 percent for income between $125,000 and $250,000, and a rate of 7.85 percent for income above $250,000. State officials say the changes would increase revenue by $97.5 million over the next two years. 

Sen. Rand Paul (R-KY) outlined the broad contours of his plan for restructuring the federal tax system in a Wall Street Journal op-ed today.  He proposes replacing the personal income tax and payroll taxes with a flat-rate14.5 percent income tax, and replacing the corporate income tax with what amounts to a value-added tax (VAT). A CTJ preliminary analysis of the plan finds that it would likely cost $1.2 trillion a year and $15 trillion over a decade.

Paul’s plan would repeal the progressive personal income tax, the estate tax, and the federal payroll tax and replace them with a single 14.5 percent “flat tax” on all types of personal income. The plan would keep a few features of the current tax code, including itemized deductions for mortgage interest and charitable contributions and the Earned Income Tax Credit, and would create a large “no tax floor” by exempting the first $50,000 of income (for married couples) from the new income tax. A CTJ analysis estimates that the switch from the progressive personal income tax to the new flat-rate tax on personal income would cost more than $700 billion in 2016 alone.

Repealing payroll taxes, the estate tax and all customs duties would cost an additional $1.6 trillion, leaving a $2.3 trillion hole in the budget. Paul proposes to fill some of that hole with a 14.5 percent “business activity tax,” which appears to be conceptually identical to a VAT. While it’s uncertain exactly what would be included in the base of Senator Paul’s VAT, a VAT at this rate could plausibly raise about $1.1 trillion a year.

When the dust clears, this would leave the federal government with $1.2 trillion less in tax revenue in fiscal year 2016 if the plan were implemented immediately—a reduction of about one-third in total federal revenues. Over a decade, the plan would cost a stunning $15 trillion.

Sen. Paul seems unfazed by this math, arguing that these massive tax cuts would act as “an economic steroid injection” that would make it possible to balance the federal budget—something Paul has proposed he would do as President. (If this line seems familiar to residents of Kansas, it’s because they’ve heard it from their governor repeatedly over the past four years.)

But it’s hard to see how this could be possible. Even the Tax Foundation, which he cites as providing evidence that his plan wouldn’t cost anything, finds that the Paul plan would cost $960 billion over ten years when “dynamic scoring” is factored in. And the Tax Foundation’s approach to dynamic scoring notoriously assumes that while tax cuts always spur economic growth, government spending on education, roads and health care has no positive impact on the economy at all. A more clear-eyed approach to measuring the “dynamic” effect of federal tax changes would at least attempt to quantify the very real—and very beneficial—effect of public investments on the national economy.

It should go without saying that given the fiscal challenges facing America—and given the chronic deficits Congress and the President have authorized in recent years—the most sensible first step toward sustainable tax reform should be to raise more revenue. But it seems very likely that Paul’s plan would blow a trillion-dollar hole in the federal budget each year. That’s the furthest thing from a sustainable tax plan. 

South Carolina Senator Lindsey Graham, yet another entrant into the 2016 GOP presidential race, has a history of supporting extremely regressive tax proposals, yet at the same time has deviated from anti-tax conservatives on a number of issues.

In terms of regressive tax proposals, Sen. Graham is the latest candidate in the presidential race to voice his support for the extremely regressive flat tax. Other supporters of the flat tax include Gov. Rick Perry, Sen. Ted Cruz, Sen. Rand Paul, Ben Carson and yet to announce candidate Gov. John Kasich.

While none of the candidates, including Sen. Graham, have specified the exact details of their proposed flat tax plans, a flat tax would make our tax system substantially more regressive and likely actually increase taxes on all but the wealthiest Americans. An analysis of a flat tax proposal by Citizens for Tax Justice (CTJ) found that the plan would actually increase taxes on the bottom 95 percent of Americans by an average of $2,887 annually, but at the same time provide the top one percent of taxpayers with an annual tax break of $209,562.

Sen. Graham’s enthusiastic support on the campaign trail for a flat tax should come as no surprise given the senator’s history of supporting extremely regressive tax reform proposals in the U.S. senate. For example, Sen. Graham co-sponsored legislation that would have replaced the federal income tax with an 8.4 percent consumption tax, which he dubbed the “BEST tax.” Given that the federal income tax is the most progressive part of the federal tax code, replacing it with a regressive consumption tax would substantially increase taxes on low- and middle-income families, while at the time providing the wealthiest Americans a massive tax cut.

Sen. Graham’s support for regressive tax change goes well beyond his support for the flat tax. During the mid-2000s for instance, Sen. Graham earned an “F” on a CTJ congressional report card for his support of the regressive and budget-busting Bush tax cuts. In addition, Sen. Graham has co-sponsored a bill to repeal the estate tax entirely, a move that would provide the richest 0.2 percent of estates with $268 billion in tax breaks over the next decade.

Although Sen. Graham has fought to make our tax system more regressive, he has shown a few moments of moderation on tax issues relative to his more conservative colleagues. The biggest deviation has been his willingness to push back against the anti-tax militancy of many of his GOP colleagues. In 2012, Sen. Graham rejected Grover Norquist’s infamous taxpayer pledge saying that he was “willing to move my party, or try to, on the tax issue.” Similarly, Sen. Graham said that he would accept a deficit reduction deal in which there were three dollars in spending cuts for every one dollar in revenue raised, which makes him distinct from Rick Perry, Rick Santorum and the entire 2012 GOP field that rejected the notion of even a ten dollars in spending cuts to one dollar in tax increases deal.

One other sensible tax position that Sen. Graham has taken is his support of the Marketplace Fairness Act, which would empower states to collect sales tax on online and other remote purchases. The move would finally end the special competitive tax advantage given to Amazon and other online retailers and provide states with additional much needed revenue.

A final, potentially praiseworthy deviation by Sen. Graham from anti-tax conservatives was his support for a cap-and-trade system. Whether it’s through an explicit carbon tax or a cap-and-trade system, either way would help combat global climate change by putting a price on to carbon and thus creating a market incentive against its use. Of course, adjustments would have to be made to other taxes to mitigate the regresssivity of a carbon tax, and it’s not clear that Graham would support these essential adjustments.

While Sen. Graham’s support of regressive tax proposals and the flat tax specifically place him well within the rightwing tax camp, his support for a variety of revenue-raising measures sets him somewhat apart from his rabidly anti-tax colleagues.

This week both the House Ways and Means Committee and the Senate Finance Committee are holding hearings to discuss how to deal with the looming insolvency of the Highway Trust Fund (HTF), and how to sustainability finance the nation’s transportation investments in the long-term.

In written testimony submitted to both committees, ITEP’s Carl Davis explains that the core reason the HTF is in crisis is that the federal gas tax is poorly designed.  On October 1st, the 18.4 cent federal gas tax rate will have gone precisely 22 years without being increased.  Over this same period of time, however, the cost of transportation construction has risen by 60 percent.  A stagnant gas tax rate coupled with inevitable inflation in the construction sector is a recipe for unsustainability.

In his testimony, Davis discusses how many states are leading the way with reforms that boost the gas tax’s long-term yield by allowing the tax rate to grow over time.  He also explains why experimental taxes on each mile driven are a promising long-run idea, but cannot raise revenue in the short-run and are susceptible to some of the same problems as the current gas tax.  Finally, Davis’ testimony notes that repatriation tax proposals actually lose revenue in the medium- and long-terms, and that these policies encourage corporations to conduct more of their operations offshore (either on paper or in reality).

Read the testimony