WASHINGTON - Sen. Chuck Grassley today urged a key federal agency not to dilute a long-awaited transparency rule that would help disclose financial ties between medical researchers who receive billions of dollars in federal funding and the pharmaceutical industry.

"The public's business ought to be public," Grassley said.  "Transparency is a backstop against research that's compromised by doctors' self-interest, to the detriment of consumers.  Backsliding on transparency would undermine the good work done in recent years to shine a light on these financial relationships."

Grassley wrote to the Office of Management and Budget in response to a media report that the agency is proposing to weaken transparency rules proposed in May 2010 by the Department of Health and Human Services.  According to the article, the Office of Management and Budget is removing the requirement in the proposed rule for a publicly available website that would publish the outside financial interests of researchers funded by taxpayers. 

The Department of Health and Human Services includes the National Institutes of Health (NIH), which is the primary means of federal funding of medical research at universities and large medical centers.  The President's proposed budget for the National Institutes of Health for 2012 is $32 billion, with about 83 percent dedicated for research around the country.

In 2007, Grassley began looking into whether universities have disclosed their professors' outside financial interests and found several cases indicating that more transparency might be helpful, including:

--The chair of the Psychiatry Department at Emory University failed to report hundreds of thousands of dollars in payments from a pharmaceutical company while researching that same company's drugs with an NIH grant.  The Health and Human Services Office of the Inspector General is now investigating the matter.

--The chair of the Psychiatry Department at Stanford University received an NIH grant to study a drug while partially owning a company that was seeking Food and Drug Administration approval of said drug.  He was later removed from the grant.

--Three psychiatrists at Harvard University failed to report almost a million dollars each in outside income while heading up several NIH grants.  Harvard released a report on the matter, and a briefing has been scheduled with Grassley's office.

Also, the Inspector General for the Department of Health and Human Services concluded that the NIH doesn't adequately monitor its outside grants for conflicts of interest.

A law enacted last year through Grassley and Sen. Herb Kohl will require public disclosure of drug company and medical device manufacturer payments to doctors, starting in March 2013. 

The rule proposed for NIH grants would require the research institutions to determine potential conflicts of interest grant by grant, such as whether the doctor owns shares in a company that could cause bias in his or her federally funded research.  The details would have to be posted online for public access. The Office of Management and Budget is proposing to eliminate the online requirement, according to a media article. 

"If the online requirement is gone, it will be much harder for the public to see and use this information," Grassley said. "Without public scrutiny, we'd lose a valuable layer of oversight."

The text of Grassley's letter is available here.

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Q.  What are tax expenditures, and why are they in the news?

A.  Tax expenditures are defined in the Congressional Budget Act of 1974 as lost federal income due to provisions in the tax code that exempt or reduce taxes for certain groups, products or activities.  Tax expenditures were intentionally passed by Congress for certain policy goals, such as encouraging employer-provided health insurance or home ownership, so they are also called tax incentives.  Since they help achieve goals set by Congress, they are not loopholes. The debate in Washington over reducing the federal debt has invoked whether certain tax expenditures should be ended.  Stopping these tax expenditures would raise money for the federal Treasury but also would take away tax incentives that are used by tens of millions of middle-income taxpayers.  There's also controversy over whether the amount of revenue raised by ending some of the tax expenditures is overstated and whether the revenue gained would be worth ending policies that support widely desirable behavior, like pension plan contributions.  

Q.  What are the biggest tax expenditures?

A.  An analysis by Senator Orrin Hatch of Utah, who serves as Ranking Member of the Senate Committee on Finance, which is responsible for tax legislation, determined these top 10 largest tax expenditures.  The analysis was based on data from the nonpartisan Joint Committee on Taxation, Congress' official estimator for the cost of tax legislation.

Exclusion for Employer-Provided Health Insurance.
Representing 13 percent of tax expenditures, it's the single largest tax expenditure.  To do away with this would threaten access to health care for families and individuals that have health insurance through their employers.

Home Mortgage Interest Deduction.
Having helped millions of Americans achieve home ownership, this expenditure accounts for nine percent of all tax expenditures.

Preferential Rates for Dividends & Capital Gains.
Take away this tax expenditure which accounts for eight percent of tax expenditures, and the rate on dividends will almost triple in less than 18 months, and the rate on capital gains will go up 59 percent, also in less than 18 months.  This will discourage investment in stocks and bonds.

Exclusion of Medicare Benefits.
Accounting for seven percent of tax expenditures, its elimination would increase taxes seniors' Medicare benefits.

Pre-Tax Treatment of Defined Benefit Pension Plan Contributions.
This is a tax benefit that reduces the cost for those workers who save for retirement.  It represents six percent of tax expenditures.

Earned Income Tax Credit. 
Designed for low-income people, the Earned Income Tax Credit accounts for five percent of all tax expenditures.

Deduction for State and Local Taxes. 
This deduction would hit high-tax states hardest, driving up the marginal rate of taxpayers who take this deduction by as much as 35 percent.  It represents five percent of all tax expenditures.

Pre-Tax Treatment for Contributions to a 401(k).  
At four percent of tax expenditures, this is a significant incentive to families and individuals to save for retirement.

Exclusion of Capital Gains at Death.  
If this one goes, death would be taxed twice.  First, the decedent's estate might get hit with the death tax.  Then the decedent's heirs would be subject to tax again on the gain embedded in any inherited asset, should they decide to sell it.  This accounts for four percent of tax expenditures.

Deductions for Charitable Contributions. 
This is the tax benefit for donations to charities other than education and health care institutions, including donations to religious institutions.  This charitable deduction represents four percent of tax expenditures.

Source: Joint Committee on Taxation, "Estimates Of Federal Tax Expenditures For Fiscal Years 2010-2014," December 21, 2010. http://www.jct.gov/publications  

 

Q.  Are tax expenditures the same as tax loopholes?

A.  Despite some political arguments to the contrary, tax expenditures are neither spending nor tax loopholes for millionaires, yachts or corporate jets.  Less than one-tenth of one percent of all tax expenditures benefit corporate jet owners.  Tax expenditures are used by many families and individuals.  Consideration of them by Congress should be done in a comprehensive tax reform debate to make sure the tax code is made more efficient and no more burdensome than it is today.

Senator Chuck Grassley issued the following comment about his vote against Majority Leader Harry Reid's proposal to increase the nation's borrowing authority by $2.4 trillion.  Senator Grassley is a senior member of the Budget Committee.  He also is Ranking Member of the Judiciary Committee and supports a balanced budget amendment to the Constitution.

"Senator Reid's bill would grant the largest debt ceiling increase in history allowing our national debt to rise to nearly $16.7 trillion.  In exchange, it includes real spending cuts of only $900 billion over the next ten years.  The American people want Congress to act to avoid default by August 2.  But, Americans also want us to reverse the spending spree that got our country in this mess, and get us on a path to fiscal sanity.  Now that it has been demonstrated that both Speaker Boehner's bill and Majority Leader Reid's bill do not have the necessary support, I hope serious, bipartisan discussions will lead to a solution to get this matter resolved."

WASHINGTON -- Sen. Chuck Grassley of Iowa today received Judiciary Committee passage of his legislation to ban the chemicals used to make the dangerous drug known as "K2" or "Spice." As committee Ranking Member, Grassley advanced the legislation, named for a young Iowa man who took his own life after using the drug.

"People are buying this drug so easily at the local mall or online that they think it's safe," Grassley said.  "The marketing is deceptive. The product is readily available.  This all makes the drug seem harmless.  It's anything but harmless.  David Rozga lost his life from using this product.  Others also have died or been seriously injured.  Congress needs to permanently control the substances used in this drug so no more lives are lost."

In March, Grassley introduced the David Mitchell Rozga Act, S. 605, named for the 18-year-old from Indianola who took his own life in June 2010, soon after using K2 purchased from his local shopping mall.  Poison control centers and emergency rooms around the country are reporting skyrocketing cases of calls and visits resulting from K2 use, with physical effects including increased agitation, elevated heart rate and blood pressure, hallucinations, and seizures.  A number of people across the country have acted violently while under the influence of the drug, dying or injuring themselves and others.

David Rozga's death may have been the first in the country stemming from this new type of synthetic drug.  In January, a high-school student in Omaha killed his assistant principal and himself.  He had K2 in his system.

Grassley met with the Rozga family last August, and David's father traveled to Washington to testify in April at a Senate Caucus on International Narcotics Control hearing that Grassley co-chaired. 

K2 abuse has even led all branches of the military to ban the use of the synthetic drug after high-profile cases arose at the Naval Academy and on the U.S.S. Bataan, which was deployed to Libya. 

In addition to approving Grassley's bill today, the Judiciary Committee also approved bills from other senators that would ban the chemicals used to make other dangerous synthetic drugs, "bath salts," "2C-E" and others.

"All of these drugs should be banned as soon as possible," Grassley said.  "They're all highly dangerous to users.  The chemicals used to produce them have no household use.  The manufacturers and sellers of these products are engaging in a cynical money-making ploy that plays with human life." 

It's necessary for Congress to act to ban the chemicals used to make the new wave of synthetic drugs because the federal Drug Enforcement Administration's capacity to ban chemicals is limited.  Grassley's legislation treats K2 like other banned narcotics such as methamphetamine and cocaine.  The same is true for the bills on "bath salts" and "2C-E." 

The text of Grassley's prepared written statement at today's Judiciary Committee meeting is available here.  Video of his verbal remarks delivered at the Judiciary Committee session is available here.

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