FEDERAL ISSUES

Climate Change
On June 26, 2009, the House of Representatives narrowly approved H.R. 2454, the American Clean Energy and Security Act of 2009.  The bill, also known as Waxman-Markey, would set a limit on greenhouse gas emissions and gradually constrict it over time.

Under the House-passed bill, major emitters of carbon, including businesses or employers that burn fossil fuels, would have to reduce their emissions or buy allowances.  These allowances would be traded on markets similar to commodities.  While proponents feel elements of the legislation could create jobs by inducing demand for energy efficiency improvements to buildings and alternative energy generation, opponents fear that making it harder and more expensive to use domestic fuels, such as coal, to generate electricity will lead to the loss of more jobs to other countries.

On September 30, Senate Environment and Public Works Committee Chair Barbara Boxer (D-CA) and Senate Foreign Relations Committee Chair John Kerry (D-MA) introduced their version of a climate change bill, the Clean Energy Jobs and American Power Act (S.1733).  The Senate Environment and Public Works Committee conducted three days of hearings on the Boxer-Kerry bill in late October.  Chairwoman Boxer had planned to mark up the bill quickly, but Committee Republicans – upset that the EPA chose not to conduct a thorough analysis of the bill – have threatened to boycott the markup.  In addition, Senator Max Baucus (D-MT) has raised concerns over the current draft, which may further delay committee action.  Before Thanksgiving 2009, majority leader Reid (D-NV) said no vote would occur until at least January 2010.

Legislation:
Text of American Clean Energy & Security Act (H.R. 2454)
Final Vote Results for H.R. 2454
Text of Clean Energy Jobs and American Power Act (S. 1733) 

Association Materials:
AF&PA Climate Change Resource Center
NMA State Impact Map
AGC looks at Climate Change Bill Title I Clean Energy
AGC looks at Climate Change Bill Title II Energy Efficiency
ACCF/NAM Study: Economic Impact of the Waxman-Markey American Clean Energy and Security Act

Labor Issues
People and talent are one of the strongest competitive advantages within any business.  For America to thrive in a global economy, it needs policies that allow employers to respond to changing economic environments and protect the right of employees to private ballots in the workplace.

The Employee Free Choice Act (EFCA, H.R.1409/ S.560) was introduced in both the U.S. House and Senate in early 2009.  EFCA seeks to replace the current process of private ballot union representation elections with a system called 'card check,' which could expose employees to coercion by union organizers and their peers and eliminate the private ballot election.   In addition, under this legislation, the government could dictate the terms of a first union contract, including wages, benefits and work rules, if a first contract cannot be reached in 120 days.

Opposition to the elimination of the private ballot has caused many lawmakers to moderate their support for EFCA, as originally proposed, but a compromise could emerge containing other provisions considered detrimental to economic competitiveness.

EFCA supporters have found it difficult to secure the necessary amount of votes to move the legislation in the Senate forward in its current form.  The swearing in of Sen. Al Franken (D-MN) effectively gave Democrats a 60-40 majority.  While Sen. Franken's presence increased the odds that EFCA supporters could secure the 60 votes needed to defeat a filibuster, others in the majority caucus were hesitant to vote for any version of EFCA.  Senate Majority Leader Harry Reid (D-NV) had planned to rush an alternative version of EFCA to the floor in the fall, but there has yet to be any movement.

Association Materials:
National Association of Manufacturers 
Associated General Contractors of America 
National Mining Association 
National Association of Manufacturers - New research on EFCA 

Health Care Legislation

On March 21, the U.S. House of Representatives voted 219 to 212 to pass the health care package that has dominated political debate since last year (Roll Call No. 165).  Thirty-four Democrats joined all Republicans in opposing the measure.  The package was the same version that passed the Senate on Christmas Eve and was immediately sent to the President for his signature.  The House also passed a reconciliation package of amendments to the Senate Health Care bill, by a vote of 220 to 211 (Roll Call No. 167).  These amendments, also known as the reconciliation package, were sent to the Senate for their consideration.

On March 24, Senate Republicans attempted to amend the reconciliation bill but were defeated in a marathon voting session that lasted until after 3:00 a.m.  The Senate Parliamentarian ruled that certain provisions (not health care related) were not allowed under reconciliation rules because they did not directly affect the budget.  Thus, because changes were made, the reconciliation bill was sent back to the House for another vote after passage in the Senate.  The final vote in the Senate on the reconciliation bill was 56 to 43 (Roll Call No. 105).  All Republicans voted no with three Democrats -- Senators Lincoln (D-AR), Nelson (D-NE) and Pryor (D-AR) -- joining in opposition from the Democratic side.

Due to the changes to the reconciliation package, the House had to “re-pass” the reconciliation bill, which they did the evening of March 25 (Roll Call No. 194), before it could be sent to the President for his signature.  While the legislative battle in the 111th Congress may be over, the debate now shifts to the courts, state legislatures, and the election arena.

Legislation:

Patient Protection and Affordable Care Act, H.R. 3590
Health Care and Education Reconciliation Act of 2010, H.R. 4872  

Association Materials:
NAM's Health Care Reform ManuFacts
The Business Roundtable: Perils of Inaction
The Business Roundtable: Cost of Coverage
U.S. Chamber of Commerce: Dangerous Health Bill Coming to Final Vote
U.S. Chamber of Commerce: Reform We Support
NFIB Issue Overview
NFIB Small Business Principles for Health Care Reform
Buisness Roundtable - Testimony to the Senate Finance Committee
Business Roundtable - Statement by President John J. Castellani

Investing in American Competitiveness
Sound tax policies provide stability for both individuals and commerce.  While required to sustain the essential functions of government, tax policies shape economic decisions and have profound, often unintended, consequences on doing business in a global market. 

International Tax:
Most developed countries charge little or no tax on foreign earnings so non-U.S. global companies generally pay taxes only where income is earned.  In contrast, the U.S. has a worldwide tax system that taxes income wherever it is earned, potentially subjecting U.S. businesses to both U.S. and foreign taxes.

U.S. tax laws have worked to level the playing field in the past by allowing companies to temporarily “defer” U.S. taxes on income from their foreign operations while they serve customers and consumers in foreign markets.  When the earnings are brought back to the United States, most taxes paid by American companies to foreign countries are credited against their U.S. tax bill.

The Administration has proposed some $200 billion in tax increases on worldwide American companies, including fundamental changes to international tax policies.  The U.S. already has the second highest statutory corporate tax rate among developed nations.  A $200 billion additional tax hike on multinational companies in the U.S. that have overseas income would make the U.S. the only major country to impose immediate high taxes on foreign earnings.

Association Materials:
NAM ManuFact
The Business Roundtable Discussion Papers 
PACE Coalition: Tax Facts

Estate Tax:
Current law gradually phases out the estate tax by 2010, but the repeal is temporary and the tax returns in 2011.  The temporary nature of the estate tax repeal provisions results in additional complexity and confusion for small businesses and, as a result, increased planning costs.  According to a recent survey, one-third of small business owners today will have to sell or liquidate part of their business to pay estate taxes.

The Administration and congressional leaders would like to keep the current estate tax rules by enacting either a one-year patch or longer-lasting legislation.  A  variety of different bills have been introduced dealing with this issue and there is a chance that an estate tax bill will be used as a vehicle to extend a variety of tax breaks scheduled to expire December 31, 2009, including the research and development tax credit.

Association Materials:
NAM ManuFact
AGC Issue Brief
AEM Issue Brief
National Association of Wholesaler-Distributors Issue Brief 

Research & Development (R&D) Tax Credit:
The R&D tax credit will expire December 31, 2009, for the 14th time since it was created in 1981. The U.S. R&D tax credit currently ranks number 17 among the 21 OECD (Organization for Economic Cooperation & Development) countries offering R&D tax incentives.  Nearly 18,000 companies of all sizes use the credit.  Some 70 percent of credit dollars are used for salaries of workers engaged in R&D, encouraging the creation of more high-paying U.S. jobs.

Association Materials:
NAM ManuFact 

Last In First Out (LIFO):
The LIFO method of inventory accounting allows businesses to match their current sales revenues with current inventory costs.  By taking into account the cost of replacing inventory, LIFO results in a more accurate measure of the financial condition of a business and the amount of economic income that should be taxed.   If Congress repeals this accounting method, a wide range of businesses would be hit by significant retroactive and prospective tax increases, making it even more difficult for U.S. businesses to compete in the global marketplace.

In February 2009, President Obama proposed repealing LIFO as part of the Administration’s 2010 budget plan. The President’s proposal would increase taxes for companies using LIFO by more than $60 billion over the next ten years.  To learn more, click here.

Association Materials:
NAM ManuFact
NAM ManuFact
AEM Issue Brief
National Association of Wholesaler-Distributors Issue Brief

Taxing S Corporations:
President Obama has suggested that an increased tax on S corporations could help fund his healthcare reform efforts.  The imposition of a tax surcharge as a “pay for” for health care reform legislation would threaten small business investment, growth, job retention and creation, employee benefits and funding for R&D.   Many of these businesses fall into the higher tax bracket, even though most of their taxed income is being reinvested into the business.   Adding a surtax onto individual rates that are already expected to rise will result in federal tax rates approaching nearly 50 percent for these businesses (with state taxes adding even more burden).  These new taxes will have longstanding negative consequences to the U.S. economy and cost jobs.

Association Materials:
NAM ManuFact

Pennsylvania Prosperity Project Affiliates: