BCA's Washington Briefing

follow us on facebook follow us on twitter follow us on youtube February 28, 2014



Governor Robert Bentley says Congress should pass legislation to make online retailers start collecting sales taxes. Bentley at the National Governors Association meeting last weekend said the federal Marketplace Fairness Act will level the playing field between brick-and-mortar retailers, who already collect and remit sales taxes, and their online-only competition.


Bentley estimates that Alabama's General Fund budget would gain $140 million to $150 million a year if online retailers were required to collect state and local sales taxes when customers buy something and have it delivered, according to the Montgomery Advertiser. Customers are supposed to pay state sales taxes on Internet purchases but rarely do.


"That tax is already owed. Even if it's a small business, you have to pay it, by law," Bentley said. "This is not a new tax."


The Senate passed the online tax bill last year but it exempted annual revenue of less than $1 million. House Republicans, including U.S. Rep. Spencer Bachus, R-Vestavia Hills, are looking at a version that may not include such an exemption, the Advertiser reported. Bachus chairs the subcommittee that deals with Internet tax issues.


"Local businesses in Alabama are put at a 10 percent disadvantage when they compete with online sales," Bentley said. Alabama's state sales tax is 4 cents, but many cities and counties levy their own sales taxes of 4, 5 or 6 cents.



Substantial job losses and reduced research and development will occur due to the Obamacare medical device tax, the Advanced Medical Technology Association said. The AdvaMed survey released this week examined the first-year impact of the medical device excise tax and concluded there will be a significant reduction in jobs, R&D, and U.S. investment. The survey said 33,000 jobs will be lost or not created.


AdvaMed surveyed member companies at the end of 2013.


"During a time when there is bipartisan support for growing high-technology manufacturing jobs, these results should serve as a wake-up call. As a result of the medical device tax, we have seen an unprecedented impact on jobs and key investments in R&D," said Stephen J. Ubl, president and CEO of AdvaMed. "The findings of the report underscore the need to repeal this tax."


The report says there will be employment reductions of approximately 14,000 industry workers and foregone hiring of 19,000 workers.


The association said that direct employment and indirect employment among suppliers and in the general economy shows a ratio of four indirect jobs for each direct job. Applying the ratio, as many as 165,000 jobs could be lost due to the Obamacare tax.


The report also showed that almost 31 percent said they had already reduced R&D as a result of the tax. Almost 10 percent said they had relocated manufacturing outside of the U.S. or expanded manufacturing abroad because of the tax. Cancelled investments and deferred plans to open new facilities also were noted.



President Barack Obama wants a four-year, $302 billion transportation bill to replace the highway funding law that ends Sept. 30, Politico and the New York Times report. Obama has made it clear that he wants to use money from a corporate overhaul to produce $150 billion to make up for recurring shortfalls in the Highway Trust Fund's gasoline tax revenues.


Republicans previously have balked at administration proposals to use revenue from closing tax loopholes. House Republicans have released their own proposal for a broad tax overhaul that would cut the top corporate income tax rate from 35 percent to 25 percent and reduce the number of individual income tax brackets from seven to two.


Congress approved a two-year, $109 billion highway bill in 2012. The Congressional Budget Office says it will take $279 billion over four years just to keep up with current demands.


Obama unveiled his plan at a speech in St. Paul, Minn. According to Politico, Obama will propose using $150 billion in "one-time transition revenue from pro-growth business tax reform" to help shore up the next transportation bill.


Obama also announced $600 million in DOT TIGER grants. The competitive grants emphasize "transformative" projects that will have "significant impact on the nation or a region," expand job access and increase economic opportunities, or catalyze economic development, the White House said.



National Association of Manufacturers (NAM) Vice President of Tax and Domestic Economic Policy Dorothy Coleman issued this statement in response to the release by House Ways and Means Committee Chairman Dave Camp, R-Mich., of a discussion draft on comprehensive tax reform:


"Today's release by Chairman Camp is a major step toward enacting comprehensive tax reform, and manufacturers look forward to working with the committee to ensure the best outcome. Comprehensive reform carries with it serious effects on our economy, along with the potential to unleash significant growth if done well. Federal tax revenues account for nearly one-fifth of GDP, and any change needs to be looked at very carefully. The NAM will be examining the draft closely, working with our members to ensure that comprehensive tax reform will result in placing manufacturers and the entire U.S. economy on a path to growth, job creation and competitiveness."


U.S. Chamber of Commerce Executive Vice President for Government Affairs Bruce Josten issued the following statement regarding the tax reform discussion draft released by House Ways and Means Committee Chairman Dave Camp:


"Chairman Camp has highlighted a much-needed discussion about how best to comprehensively reform the tax code, but the Chamber is concerned about the negative impact some of the proposals in his current plan could have on our still-struggling economy. We have long advocated for tax reform as a catalyst for creating jobs, economic growth, and stronger international competitiveness. Even Chairman Camp would be the first to admit that his plan is not the end of the road but just the next step in a long journey. We will review these proposals in greater detail and offer our recommendations for ensuring they will help - rather than hurt - economic growth, business confidence, and international competition.


"The U.S. Chamber will remain engaged in what we expect will be a robust debate over the best means to accomplish the goal of comprehensive tax reform, and we look forward to working with Chairman Camp and other members of the House and Senate to continue advocating for our members' priorities."

The Business Council of Alabama is Alabama's exclusive affiliate to the U.S. Chamber of Commerce and the National Association of Manufacturers.



The White House's myth/facts webpage states that Obamacare "lowers costs for American businesses - especially small businesses." However, according to the U.S. Chamber of Commerce, an Obama administration report concludes that the Affordable Care Act will make health plans less affordable for nearly two-thirds of small businesses and their employees. The Centers for Medicare and Medicaid Services (CMS) report concludes: "We are estimating that 65 percent of the small firms are expected to experience increases in their premium rates while the remaining 35 percent are anticipated to have rate reductions."


The Affordable Care Act requires all non-grandfathered health insurance coverage in the individual and group markets to be guaranteed issue and guaranteed renewable, the U.S. Chamber reported. Non-grandfathered insurance plans and policies in the individual and group markets can vary premium rates based only on age, family status, geography, and tobacco use, with some exceptions. The new requirement will affect premiums paid by individuals and families working for small employers who offer health insurance. The U.S. Chamber estimates that the premium rates for roughly 11 million people will increase and about 6 million people will see a premium rate reduction.

The National Association of Small Businesses said, "[S]mall businesses paid an average of $1,121 a month per employee for individual coverage [in 2013], up from $590 in 2009, the year before the ACA was enacted."


In 2009, President Obama promised that his health care law would make health insurance "more affordable," but instead, small businesses have gotten a double whammy with the poor rollout of SHOP Marketplace exchanges and higher premiums, the Chamber said.


Defense chief says more bases must close

Federal Times (Medici 2/25) "The Defense Department must close bases and realign its forces in order to meet congressional mandated budget cuts, according to DoD Secretary Chuck Hagel. Hagel said in a Feb. 24 speech DoD will ask Congress for another base realignment and closure (BRAC) round that would cut billions from its infrastructure costs.


"He added that Congress has blocked two previous requests, and that if it does so again DoD will cut base costs wherever it legally can. DoD cannot close down a base in its entirety within the United States without congressional approval. 'We cannot fully achieve our goals for overhead reductions without cutting unnecessary and costly infrastructure,' Hagel said.


"In 2004, DoD estimated it had about 25 percent excess infrastructure. The 2005 base realignment and closure process cut roughly 3 percent of that. The department saves more than $12 billion a year from the five BRAC rounds announced between 1998 and 2005 and is hoping to save more in a future consolidation. In Europe, Hagel said, DoD has already reduced its infrastructure by 30 percent since 2000 and will craft a plan for additional cuts this spring."

Tax plan sends shockwaves down K Street

The Hill (Needham 2/26) "Rep. Dave Camp (R-Mich.) divided Washington's powerful industry groups into warring camps on Wednesday with his no-holds-barred proposal for tax reform. The release of the plan, which was years in the making, revealed one of the most closely held secrets in Washington: the tax breaks that the Ways and Means chairman thinks should be sacrificed in the name of a simpler, fairer system.


"Industry groups on the losing end of Camp's proposal were swift to denounce it, with one of the most vocal protests coming from the hedge fund industry, which saw its treasured carried-interest provision singled out for elimination. Under Camp's plan, the top income tax rate for individuals would drop to 25 percent from 39.6 percent while adding a new 10 percent surtax on some earned income above about $450,000. The top corporate income tax rate would fall from 35 percent to 25 percent.


"While Camp's proposal appears to be going nowhere in Congress, elements of the 1,000-page plan could be revived in future tax reform efforts - and that has many interest groups worried. Major players in the financial industry lined up to denounce Camp's proposal to create a new quarterly fee for financial institutions with assets above $500 billion.


"Camp's plan also targets two of the most popular carve-outs in the tax code: the deductions for mortgage interest and for state and local property taxes. For mortgages taken out after 2018, the plan would cap deductible mortgage interest for loans of at least $500,000, down from the current level of $1 million. The plan also would nix the ability of taxpayers to deduct state and local income taxes, except for those that are paid to run a business."


US Chamber of Commerce   National Association of Manufacturers