Memo: Fiscal Sanity in the Year End Budget Deal

To:                Interested Parties
From:          Heritage Action for America
Date:            December 05, 2017
Subject:    Fiscal Sanity in the Year End Budget Deal (PDF)

Government funding for defense and domestic agencies will expire after Friday, December 8. Congress is expected to vote on a temporary two spending bill – a continuing resolution, or CR – to further negotiations over an omnibus spending bill that funds the remainder of the fiscal year.

Conservatives are rightly concerned that a funding deadline the Friday before a major holiday is disadvantageous to good policy making. It would empower some lawmakers that are seeking to exploit the last minute nature of a government “shutdown” while Americans are spending time with their families. Those lawmakers are seeking a budget deal that defies fiscal sanity – raising out-of-control spending without any enforceable fiscal restraints – and an untold number of big-government policy add-ons ranging from Obamacare bailouts to amnesty.

A Conservative Budget Deal

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Eliminating the Diversity Visa Lottery the Right Way

To: Interested Parties
From: Heritage Action for America
Date: November 08, 2017

On October 8, 2017, the White House released a letter from President Trump to Congress outlining several “principles” for immigration reform. The letter called for ending “extended-family chain migration by limiting family-based green cards to spouses and minor children” and replacing these policies with a “merit-based system that prioritizes skills and economic contributions over family connections.” The letter also called for elimination of the diversity visa lottery.

The Halloween terrorist attack in New York City drew attention to a decades old immigration program known as the Diversity Immigrant Visa Program because the 29-year old suspect, Sayfullo Habibullaevic Saipov, used it to migrate to the United States from Uzbekistan. Following the attack, President Trump reiterated his support for eliminating the Diversity Immigrant Visa Program, or “diversity visa lottery.”

The Heritage Foundation has long opposed the diversity visa lottery, calling for its elimination and replacement with a system that favors employment-based visas and merit-based applicants. While the terrorist arrested in the New York City attack used the visa system to enter the United States nearly a decade ago, this is not a failure of the current vetting system in general or the suspect’s visa in particular.

Saipov is a homegrown terrorist who was radicalized in America subsequent to his legal entry. James Carafano, an expert in national security and foreign policy at Heritage, makes this point in The Daily Signal: “No visa program per se represents a particular terrorist threat if proper vetting and security practices are in place,” adding:

Proper measures are determined by competent risk assessments. Terrorists have tried every manner to come to the U.S. that can be imagined. If we banned a method of travel because a terrorist tried to use it, we would have to ban all travel to the U.S. The president was right to criticize the lottery visa—it’s not a useful or efficient or appropriate tool for determining who should immigrate here. We need a merit-based system.

Brief History

The U.S. State Department, which administers the diversity visa lottery using U.S. Citizenship and Immigration Services (USCIS) vetting processes and data, explains that Section 203 of the Immigration and Nationality Act (INA) provides for a category of immigrants known as “diversity immigrants” from countries with historically low rates of immigration to the United States.

The diversity category was added to the INA by the Immigration Act of 1990 and awards green cards, or legal permanent residence, to eligible applicants among six geographic regions with no single country receiving more than 7 percent of the total available visas in any one year. The State Department recently stated that 50,000 diversity visas will be available for fiscal year 2019, the application period of which closes on November 22, 2017.

Like numerous other government programs that award a valuable commodity – in the diversity lottery’s case, green cards or legal permanent residence – the program is subject to fraud and abuse. The U.S. Government Accountability Office found pervasive fraud in the program, concluding in a 2007 report:

Since its inception, the DV [diversity visa] program has facilitated thousands of individuals from countries currently underrepresented in the U.S. immigrant pool to immigrate to the United States. However, consular officers at 5 of the 11 posts we reviewed reported that fraud in the DV program is a major challenge […]. While fraud is an issue across all immigrant visa categories, there are specific aspects of the DV program […] that make it particularly vulnerable to manipulation from an unscrupulous visa industry in some countries.

As the State Department’s Office of Inspector General (IG) plainly summarized in a warning years earlier, “The DV [diversity visa] program is subject to widespread abuse.”

A Better Approach

As noted above, the application period for the next round of diversity visas closes on November 22, 2017. Recent media reports suggest that the president and several Senate Republicans will meet to discuss “progress on Capitol Hill thus far of any legislative fix to the end of the Deferred Action for Childhood Arrivals [DACA] program” or a potential “DACA fix.” Another report suggests Senate Republicans are “looking to move an immigration bill to the floor early next year.”

Any proposed deal to simply swap elimination of the diversity visa lottery with blanket amnesty for DACA recipients should be a nonstarter. Neither of these policies would address the underlying problems in our current family-based, or chain-migration, system which prioritizes immediate relatives before meeting the more pressing needs of our country – including demand for high-skilled migrant applicants seeking employment-based visas.

Congress could simply amend the Immigration and Nationality Act to eliminate the diversity immigrant program altogether. Rep. Bill Posey (R-Fla.) proposed a bill to do just that (H.R.1178). Indeed, as the Congressional Research Service (CRS) outlined, recent Congresses have attempted to eliminate the diversity visa lottery. Legislation similar to H.R.1178 passed the House in 2005 after a thorough committee process. However, the effort was subsequently blocked by Senate Democrats.

Beyond eliminating this misguided and pervasively fraudulent program, a rational immigration policy – one that makes sense for our nation’s economic needs – would reallocate the 50,000 visas in favor of awarding visas to foreign-born graduates of U.S. universities who earn advanced degrees in science, technology, engineering, and mathematics – or STEM.

According to State Department statistics on numerically-limited immigrant categories, as of November 1, 2016, the number of applicants on waiting lists in employment-based preference categories totaled 4,367,052. In other words, Congress mandated that USCIS and State – agencies it has tasked with administrative responsibilities to meet our nation’s immigration needs – vet and award thousands of visas annually under the moniker of “diversity” while leaving millions of prospective workers on a waiting list.

Conclusion

Lawmakers should take concrete steps to end the Diversity Immigrant Visa Program and begin reforming our legal immigration system to serve American interests in the 21st century. Specifically, Congress should reduce costly, low-skilled immigration, eliminate blanket family-based chain migration, and move toward a rational, merit-based migration system.

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Letter Supporting Scott Garrett to Lead Export-Import Bank

Heritage Action sent the following letter in support of former Rep. Scott Garrett’s nomination to lead the Export-Import Bank to Senate Banking Chairman Mike Crapo:

October 27, 2017

Dear Chairman Crapo:

We urge you and your fellow committee members to support the nomination of former Representative Scott Garrett (PN 673) to serve as President of the Export-Import Bank (Ex-Im Bank) of the United States. To be clear, we do not believe the Ex-Im Bank needs additional board members; however, if the Trump administration insists on refilling the board then the committee should confirm a reform-oriented leader, and Mr. Garrett is perfect for that job.

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Heritage Action Supports Jones Act Repeal Efforts

In the wake of Hurricane Maria’s damage to Puerto Rico, the Trump administration waived the restrictions the Merchant Marine Act of 1920, commonly known as the Jones Act, imposes on shipping to the island. The Jones Act is an outdated WWI protectionist law that regulates domestic U.S. shipping practices by mandating any good shipped by water between two points in the U.S. must be transported on a U.S. built, U.S.-flagged, and at least 75 percent U.S.-crewed vessel.

In effect, the Jones Act drives up shipping costs for American consumers by creating a government monopoly for U.S. only shipping commerce. According to a Heritage Foundation report, Sink the Jones Act: Restoring America’s Competitive Advantage in Maritime-Related Industries:

“Foreign companies carry more than 80 percent of traffic in American international liner commerce. The Jones Act keeps otherwise uncompetitive elements of the American shipping industry afloat, but this legislative gift to the shipping industry carries a stiff price. The Jones Act harms the U.S. economy by driving up shipping costs. It increases energy costs, stifles competition, and hampers innovation that is essential to the long-term competitiveness of the U.S. shipping industry, and the national security argument for the Jones Act is weak at best.”

For the island of Puerto Rico, the Jones Act has a significantly worse effect given its dependence on the shipping industry to transport goods and services. According to the Federal Reserve Bank of New York, the Jones Act is especially harmful to Puerto Rico:

“It costs an estimated $3,063 to ship a twenty-foot container of household and commercial goods from the East Coast of the United States to Puerto Rico; the same shipment costs $1,504 to nearby Santo Domingo (Dominican Republic) and $1,687 to Kingston (Jamaica)—destinations that are not subject to Jones Act restrictions…Shipping goods to and from Puerto Rico costs considerably more than shipping to and from the Island’s regional peers, imposing an important cost on Puerto Rican businesses and dampening the economy’s competitiveness. Much of this relatively high cost of shipping is widely attributed to the Jones Act.”

Thankfully, legislative efforts to repeal the Jones Act for the island of Puerto Rico have gained momentum. Sen. John McCain introduced a bill to exempt Puerto Rico from the coastwise laws of the United States (commonly known as the “Jones Act”) (S. 1894) that would repeal the Jones Act for the island of Puerto Rico. In the House, Rep. Gary Palmer introduced the Puerto Rico Humanitarian Relief Act (H.R. 3966) that would exempt Puerto Rico from the Jones Act for five years.

There are three American territories currently exempt from the Jones Act, including the U.S. Virgin Islands, which was exempted in 1992. Ideally, Congress should pass legislation permanently repealing the Jones Act for the entire country, but the legislative efforts by Sen. McCain and Rep. Palmer represent a good first step toward ending this damaging and outdated law. At a minimum, Congress should include a provision to repeal the Jones Act on upcoming disaster relief legislation.  

Heritage Action supports Jones Act repeal legislation, encourages Representatives and Senators to support it, and reserves the right to key vote in the future.

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Internet Sales Tax Should be Dead on Arrival

The internet is one of the most exemplary free market and innovation success stories of our life time. Over the last few decades, it has helped grow the economy, expanded opportunities for entrepreneurs, and enhanced consumer choice for all Americans by allowing unprecedented access to online goods and services.

Unfortunately, internet freedom is under attack by politicians willing to distort markets and tilt the playing field toward their favored businesses at the expense of the vast majority of Americans who benefit from online marketplaces.

The latest attack on the internet and its users is internet sales taxation. Earlier this year, Reps. Kristi Noem (R-S.D.) and John Conyers Jr. (D-Mich.) introduced the “Remote Transactions Parity Act” (H.R. 2193) while Sens. Mike Enzi (R-Wyo.), Dick Durbin (D-Ill.), Lamar Alexander (R-Tenn.), and Heidi Heitkamp (D-N.D.), introduced a similar bill titled the “Marketplace Fairness Act” (MFA) (S. 976).

Although they vary slightly, both proposals allow state governments to tax out-of-state sales on internet-based transactions. If enacted, an internet sales tax of this kind would disrupt the free flow of commerce, impose revenue collecting compliance costs for millions of businesses, and brazenly violate the classic American principle of “no taxation without representation.”

The U.S. Constitution, as confirmed by the Supreme Court’s 1992 decision in Quill Corporation v. North Dakota, was designed to protect interstate commerce from this sort of federal intrusion among states. James L. Gattuso, Senior Research Fellow in Regulatory Policy at The Heritage Foundation, explains:

“Under Quill, states can require businesses to collect their sales taxes only if those businesses have a physical presence (a building, warehouse, or employees) in their state. For instance, if a customer living in Virginia buys a product from a retailer with a physical presence only in Maryland, the customer pays no sales tax because Virginia can’t force the Maryland retailer to collect the tax.”

Supporters of the internet sales tax seek to overrule Quill, and the Court noted in its decision that Congress has authority to do so under the commerce clause. However, related legislative proposals thus far are severely misguided.

Identifying the political factors at play is critical to informing policy solutions. As Heritage Action previously outlined:

“The MFA is simply a political ploy to line the pockets of revenue hungry state governments that don’t want to cut spending. Worse, major retailers are playing politics to drive out competition from small, Internet-based competitors. Many big businesses have a physical nexus in several states and already collect remit sales taxes for online sales specifically because of their physical nexus in a variety of states. They are working to convince small brick-and-mortar companies that they are on the same team — a team that wants to ensure small, online businesses have to bear greater tax burdens.”

Businesses like Amazon, who have a physical presence in almost every state, are also in favor of a convoluted federal internet sales tax scheme because it aligns with their current business model. The company announced earlier this year it would voluntarily collect sales taxes in every state that has a sales tax.  The various internet sales tax bills in Congress would not hamper big online retailers, but would punish small startup businesses and mom-and-pop remote sellers. As Sen. Ron Wyden (D-Ore.) warned in 2013, “an Oregon business would have to collect taxes for New York, but Chinese firms wouldn’t have to collect taxes for any State.” Wyden predicted that “people are going to end up calling” the internet sales tax scheme “the shop China bill.”

In addition to the mounting evidence that an internet sales tax would be economically detrimental, there is a generational divide among Americans. A 2013 Gallup poll found that 73 percent of Americans between 18 and 29 opposed an internet sales tax. 62 percent of those between 30 and 49 felt similarly. However, only 46 percent of those 50 and older opposed an internet sales tax. The RNC’s Growth and Opportunity report from 2012 urged lawmakers to “Promote forward-looking, positive policy proposals that unite young voters” whose “perception of the two parties was born during the Barack Obama era.”

Republicans in Congress should reject misguided efforts to pass an internet sales tax and instead focus on fulfilling their campaign promise to enact comprehensive tax reform that cuts rates and helps grow the economy. Passing an internet sales tax, especially in the context of a larger tax reform package, does the opposite. Heritage Action will continue to work with members of Congress to oppose internet sales taxation, and would key vote against a proposal should it come for a vote.  

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