Taxes
Congress, with its back to the wall and the looming threat of a weak recovery turning into a double-dip recession, acted on the expiring tax provisions. They extended existing income tax rates, taxes on capital gains and dividends, the AMT “patch,” and the already-expired tax “extenders” (the R&D tax credit, the ability to deduct state sales taxes, and many more). They cut a deal to reinstate the estate tax, but at a lower rate (35%) and with a bigger exclusion ($5 million) than many thought possible. And they reduced the employees’ payroll tax withholding by two percentage points next year, allowing workers to keep and spend more of their income. Now, the talk is of restructuring the entire tax code, to streamline the system by eliminating credits and deductions and flattening tax rates at lower levels. It’s a huge undertaking, with limited chances of success in such a fractured political environment.
Health Care
The sweeping health care package that Congress passed is now law. What remains is implementation – writing hundreds of new rules, setting up new agencies in all 50 states, enforcing compliance, processing lawsuits aimed at stopping the new health plan, and dealing with unforeseen consequences through future legislative fixes. The massive health care law creates 159 new agencies, commissions, panels, and other bodies. Topping the list of concerns is the 1099 reporting requirement, but that is hardly the only problem. When McDonalds’s insurers said they’d have to drop coverage for 30,000 employees the company quickly received a waiver from new requirements on plan benefits. Many more problems on this scale or larger will surely arise.
Employee Free Choice Act
The card check bill, EFCA, never got over the 60-vote hurdle in the Senate. Efforts by the U.S. Chamber and many of you helped raise the heat on key Senators, making them unwilling to support a bill that would spur unionization through openly undemocratic means. However, be on the lookout for possible executive orders and rulemakings by the NLRB and Department of Labor that would advance the main objective of the card check bill – making it easier for unions to organize and harder for employers to resist – but would circumvent Congress altogether.
Cap-and-Trade
Climate change legislation should 1) preserve American jobs and the competitiveness of U.S. industries, 2) provide for an international solution that includes emerging nations, 3) promotes accelerated development and deployment of greenhouse gas reduction technology, 4) reduces barriers to the development of climate-friendly energy sources, and 5) promotes energy conservation and efficiencies. The cap-and-trade proposals that passed the House and died in the Senate did not accomplish those goals. The election results put the final nail in the cap-and-trade coffin, though other approaches may be tried. Most ominously, the EPA may go it alone with a heavy-handed regulatory regime. Resource: www.energyxxi.org.
Transportation
The 111th Congress failed to pass a reauthorization of federal highway and transit programs – SAFETEA-LU, and the programs and fees associated with the daily operations of the Federal Aviation Administration (FAA). Both of these programs are currently operating on a series of short-term extensions. Congress also failed to enact a Water Resources Development Act (WRDA), a bill which is supposed to be enacted every two years and deals with various aspects of water resources including navigation infrastructure. The relevant committee chairmen have all indicated that they plan to move forward drafting each of these important pieces of legislation at the beginning of the 112th Congress.
Financial Regulatory Reform
On July 21, President Obama signed the “Wall Street Reform and Consumer Protection Act of 2010” (Dodd-Frank) into law. While the U.S. Chamber was able to make some improvements, Dodd-Frank does not achieve comprehensive and effective regulatory reform nor does it address some of the core causes of the financial crisis. The real impact of the Act will depend on its implementation by regulators who will write nearly 500 new rules, 60 studies, and 63 reports. Looking forward, the U.S. Chamber’s Center or Capital Markets Competitiveness (CCMC) will ensure that key regulatory proposals meet federally required cost-benefit tests and are supported by empirical evidence. We will challenge regulations that do not meet these tests and could harm the economy during the rulemaking process and, when necessary, in the courts. Resource: www.centerforcapitalmarkets.com.
Trade
After several long years of negotiations, the White House signed the Korea – U.S. Free Trade Agreement, known as KORUS, in early December. This agreement must now be ratified by Congress. KORUS will dramatically open Korean markets, the 15th largest economy in the world, to U.S. exporters once it is ratified, and could boost U.S. exports by more than $10 billion and GDP by $12 billion. This will be an exciting opportunity in the new Congress for chambers of commerce to work proactively on legislation to expand the economy and grow jobs. Resource: www.uskoreafta.org.
Immigration Reform
This year, Congress limited its efforts on immigration to passage of the Dream Act – and came up short. Next year, expect the first moves in this area to be on enhancing security, at the borders and through employment verification (E-Verify). Add in a workable guest worker program and perhaps the Dream Act and a deal might be possible, if still unlikely. Resource: www.ewic.org.
