Legislative Updates

House Passes Bill Despite the Burden New Taxes Will Place on Businesses

Organizations representing Main Street businesses, including FEDA, sent a letter to House leaders last week asking them to oppose the Inflation Reduction Act (IRA). The bill imposes a 15 percent minimum tax on corporations making more than $1 billion, increase IRS enforcement and create a new 1 percent tax on share buybacks.

The house ultimately passed the bill with a 220-207 party-line vote late afternoon Aug. 12. The IRA is expected to raise $737 billion in revenue over 10 years, allocated nearly $370 billion of that to climate change action and $64 billion to extend subsidies for health insurance under the Affordable Care Act. The remaining $300 million will go toward reducing the national debt. The Senate previously passed the legislation and President Joe Biden is expected to sign it into law later this week.

“The Biden Administration claims the savings in the IRA are ‘front-loaded’ and will reduce the deficit in the short-term, helping to ease inflationary pressures,” the letter states. “That is simply not the case. Recent analysis by the Congressional Budget Office, Penn-Wharton and others shows the Inflation Reduction Act would increase prices in the short term and do little to bring them down in the long run.”

The letter also argues that the $80 billion in additional funding for the IRS would burden owners of family businesses who have full complied with the tax code. “We support addressing the tax gap and oppose illegal tax evasion, but as former National Taxpayer Advocate Nina Olson observed recently, it is wrong and counterproductive to characterize the entire tax gap as willful tax evasion,” it says.

Further, a last-minute amendment to the IRA extends for two years the cap on losses a business owner is permitted to claim, equating to a $52 billion tax hike on pass-through businesses. “The cap on active pass-through loss deductions is bad policy at any time, but it is particularly harmful when the economy is weak and an increasing number of businesses are suffering losses. The timing of this amendment’s adoption could not have been worse,” the letter states.

The full letter is available here.

Aug. 8, 2022

Climate Change and Prescription Drug Pricing Bill Will be Paid For By New Taxes on Businesses

The Inflation Reduction Act passed the Senate with a 51-50 vote Sunday afternoon, making large investments in climate change action and reducing the national debt, but at the cost of imposing a 15 percent minimum tax on corporations making $1 billion or more in income.

The bill is expected to raise more than $740 billion in revenue over 10 years, the bulk of which ($258 billion) will come from a new 15 percent corporate minimum tax. Other revenue generators are prescription drug pricing reform ($288 billion) and increased IRS tax enforcement ($124 billion). A proposal to close the carried interest loophole, which allows investors to pay lower taxes on asset sales by treating them like capital gains instead of income, was removed from the bill to secure Sen. Kyrsten Sinema’s (D-AZ) support, however, in exchange for that removal, there will be a new 1 percent tax on share buybacks ($74 billion).

The new revenue will help fund several goals Democrats had included in the original $3.5 trillion Build Back Better Act, albeit at a much scaled-down level. More than $360 billion will go toward reducing carbon emissions and another $64 billion will extend subsidies for health insurance under the Affordable Care Act. The remaining $300 billion will be set aside for deficit reduction.

The bill now heads to the House of Representatives, where it is expected to be voted on later this week. As such, business organizations have turned their focus to the House. A letter signed by national trade groups, including FEDA, and local chambers of commerce urged House members to oppose the legislation.

“This legislation includes taxes that would discourage investment and undermine economic growth and price controls that would limit American innovation,” the letter states. “Despite the name of the bill, independent analysis confirms that it would have little to no impact on inflation and may, in fact, increase inflationary pressure in the near-term.”

It further argues that the new tax on stock buybacks would diminish the value of Americans’ retirement savings and that the proposed corporate minimum tax would create a competitive disadvantage for U.S.-based businesses. “This is the absolute wrong time to increase taxes on American job creators or implement price controls on American innovators,” the letter says. “We urge Congress to reject this misguided legislative package.”

“This new funding will empower the IRS to audit, scrutinize, and even harass many family-owned, small businesses, that are following the law and paying their taxes,” said Jade West, chief government relations officer for the National Association of Whoesaler-Distributors. “Now is not the right time for increasing taxes on hardworking Americans and small business owners. Rather than increasing audits, the IRS should prioritize modernizing its IT services, addressing the backlog of tax returns, and making the agency more customer friendly,”

Those concerns were echoed by the U.S. Chamber of Commerce. In a statement on Aug. 5, Neil Bradley, executive vice president and chief policy officer for the U.S. Chamber, called the legislation a “power grab” that would lead to fewer medical innovations and harm the economy. “Taxing capital expenditures – investments in new buildings, factories, equipment, etc. – is one of the most economically destructive ways you can raise taxes,” he said. “It punishes innovation, leaves a country poorer and less capable of growing.”

Still, U.S. Chamber officials did praise some aspects of the bill. Martin Durbin, senior vice president of policy and president of the chamber’s Global Energy Institute, noted that the bill would advance progress on climate and energy security through measures such as the tax credit for purchasing electric vehicles funding the development of carbon capture, utilization, and storage technology. “Climate progress and energy security are not mutually exclusive, even though they are sometimes treated as such,” Durbin wrote. “We can increase American energy production while still lowering emissions. In fact, boosting domestic oil and gas production will help reduce global reliance on foreign sources that have a more significant environmental footprint. While certainly not complete in its scope, the reconciliation bill at least acknowledges these benefits by directing the resumption of legally required offshore oil and natural gas leasing and by attempting to ensure continued leasing for both oil and natural gas and for offshore wind.”

Aug. 8, 2022

Agency Attempting to Expand its Function to Reshape Financial Industry

The recent rhetoric and changes in policies at the Consumer Financial Protection Bureau (CFPB) are creating uncertainty and threaten to radically reshape the American financial services sector, Tom Quaadman, executive vice president of the U.S. Chamber’s Center for Capital Markets Competitiveness, wrote for RealClearPolicy.

The chamber continues to push back against the CFPB and its director, Rohit Chopra, for their alleged unlawful attempts to act as an antitrust regulator and manage competition across the financial services sector. In his new column, Quaddman warns that the agency intends to ban certain financial products and restructure the industry, moves that would hurt businesses and consumers by limiting the types of mortgages, car loans, and personal credit that financial companies can offer individuals.

“Overzealous regulation will not make the marketplace more competitive, instead it will disincentivize companies from innovating and meeting the disparate needs of millions of consumers,” Ouaddman said.

In July, the U.S. Chamber raised objections to several recent CFPB actions, including expanding the director’s powers in ways that undermine due process and the agency’s new rule that claims state attorneys general have the authority to enforce the Consumer Financial Protection Act. “The CFPB needs to stop acting outside its authority and focus on its expertise of consumer protection, not reshaping markets,” Quaddman wrote. “The chamber has consistently advocated for over 10 years for the CFPB to be governed by a bipartisan commission and have its funding subject to oversight by Congress via the appropriations process.”

July 18, 2022

61 Percent of NAFEM Members Say Tariffs Causing Economic Harm

The U.S. International Trade Commission (ITC) will hold public hearings this week on Section 232 and 301 tariffs, which are believed to be contributing to supply chain shortages and price increases.

Section 232 relate to steel and aluminum imports, and in March 2018 then-President Donald Trump imposed a 25 percent tariff on steel and a 10 percent tariff on aluminum. The Section 301 tariffs cover goods and materials imported from China. The list of items covered in Section 301 was expanded in July 2018 as part of the Trump administration’s trade policy. Both tariff expansions have impacted the competitiveness of U.S. manufacturers and created supply chain bottlenecks. Groups such as the North American Association of Food Equipment Manufacturers (NAFEM) have asked the Biden administration to terminate or reduce the tariffs

In response, Congress directed the ITC to begin a fact-finding investigation into the economic impact of the tariffs on domestic industries. The agency has already begun collecting data and will hold three days of hearings July 20-22. The Department of Commerce and the U.S.' Trade Representative are expected to use insights from the ITC to make policy recommendations.

NAFEM surveyed members about the impact the tariffs have had on their business and is sharing the results with the ITC. The association found:

  • 100 percent of respondents have felt the effects of Section 232 and 301 tariffs.
  • 61 percent reported that the tariffs are causing economic harm to their companies.
  • More than 90 percent said tariffs are impacting their businesses’ abilities to control costs.
  • Nearly 73 percent said removal of Section 232 tariffs would help relieve business pressures and 68 percent reported that same regarding removal of Section 301 tariffs.

“The ITC investigation is a great opportunity for NAFEM to amplify the issues we’ve been advocating for the past four years,” said Charlie Souhrada, CFSP, the association’s vice president of regulatory and technical affairs. “We plan to fully participate in the virtual public hearing and submit written comments.”

The U.S. Chamber of Commerce also continues to advocate for lowering tariffs, which it has said are contributing to the country’s highest inflation levels in 40 years. “The U.S. is imposing record levels of tariffs – which are just taxes – on both finished goods and intermediate products used in American manufacturing,” the U.S. Chamber wrote in May. “These tariffs distort markets and cost American families approximately $1,200 a year in increased costs according to the non-partisan Congressional Budget Office. It is past time to begin providing tariff relief to American families and businesses.”

July 11, 2022

Average Households Paid More than $1,200 for Tariff Costs in 2020

Pulling back on the wave of new and expanded tariffs implemented in 2018-19 would provide immediate relief to businesses and individuals that are struggling against high inflation, U.S. Chamber of Commerce President and CEO Suzanne Clark wrote in an op-ed for Barron’s earlier this month.

As Clark notes, tariffs are essentially taxes paid almost entirely by U.S. businesses and consumers and they disproportionately impact low-income families that spend a larger share of their income on household goods and necessities, rather than services. The Congressional Budget Office estimates that tariffs cost the average U.S. household more than $1,200 in 2020. Meanwhile, the government’s revenue from tariffs has grown from $30 billion in 2017 to $100 billion in 2022.

Cutting or reducing those tariffs would lower the cost of raw materials and components needed to manufacture goods in the United States, leading to lower prices. “Inflation has reached its highest level in four decades. Families across the country are feeling the hit to their pocketbooks,” Clark writes. “There’s no panacea for these woes, but tariff relief could provide quick and meaningful help for American families and businesses.”

July 11, 2022

Congress Considering Changes to Net Investment Income Tax and Ability to Deduct Losses During Downturns

Lawmakers on Capitol Hill are considering two proposals that would increase taxes solely on small, individually and family-owned businesses.

The two tax increases being considered would (1) expand the 3.8 percent Net Investment Income Tax (NIIT) to individuals and families who actively participate in their business and (2) limit the ability of small businesses to fully deduct their losses during an economic downturn by expanding and extending the “excess business loss limitation” for noncorporate taxpayers.

Together, these increases would raise $400 billion in revenue over 10 years but the impact on businesses would be even greater. Expanding the NIIT would result in an 11 percent increase in the rates imposed on family-owned businesses, according to Reardon Consulting, a government affairs and consulting firm. Up to 1 million small and family-owned businesses, which represent more than half of all pass-through business activity, could see their rates increase under this policy, hurting their ability to recover from the pandemic.

In a letter to Congress, cosigned by FEDA and other trade associations, Reardon Consulting says the proposals are “ill-advised tax policy.” Raising taxes on small and family-owned businesses with the economy on the brink of a recession, a situation which is compounded by the other post-pandemic challenges they face, harms not only these businesses but the families and communities who rely on them,” the letter states.

June 27, 2022

Expanding H-2B Visas can Help Fill the Gap

With nearly twice as many job openings (11.4 million) as there are people to fill them (6 million), every industry is facing historic levels of worker shortages. But employers that traditionally only hire during the summer are among the most impacted, including amusement parks, public pools, beach towns and other warm-weather attractions.

The lack of employees means that many of those summer destinations won’t be operating at 100 percent this year – which will have a major effect on the foodservice industry. The International Association of Amusement Parks and Attraction’s 2019 Global Theme and Amusement Park Outlook report found that food, merchandise and other spending account for 25 to 30 percent of amusement park revenue. That’s a significant share for an industry that generated $16.8 billion in the United States in 2021, according to market research firm IBISWorld.

One way to fill those jobs is by expanding the number of available H-2B temporary work visas. Amusement and recreation jobs are the second most common roles filled by H-2B workers, according to the U.S. Department of Labor. In anticipation of a seasonal worker shortage, the Dtepartment of Labor and the Department of Homeland Security in March made 35,000 more H-2B visas available for fiscal year 2022.

But more could be done to lure the 6 million unemployed individuals back into the workforce. Last year, the U.S. Chamber of Commerce launched the America Works initiative to address the worker shortage. The program chronicles the impact of the worker shortage through data and case studies and recommends policy solutions, such as improving educational and job training opportunities, expanding the availability of affordable childcare to help parents return to work and immigration reform to bring new workers into the country.

June 22, 2022

Remaining Primary Dates and Registration Information

With the mid-term elections quickly approaching, FEDA encourages its members to make sure they are registered to vote.

But FEDA members don’t have to wait until Nov. 8 to shape the election. Already 26 states have held their primary elections and five more states – Colorado, Illinois, New York, Oklahoma, and Utah – are scheduled to have their primaries Tuesday, June 28.

The U.S. Chamber of Commerce provides a simple resource for individuals to register to vote, check their voter registration status, obtain early voting information and find polling locations for election day. Please click here for more information:.

The remaining primary schedule is as follows:

June 28 – Colorado, Illinois, New York, Oklahoma

July 19 – Maryland

Aug. 2 – Arizona, Kansas, Michigan, Missouri, Washington

Aug. 4 – Tennessee,

Aug. 9 – Connecticut, Minnesota, Vermont, Wisconsin

Aug. 13 – Hawaii

Aug. 16 – Alaska, Wyoming

Aug. 23 – Florida, New York congressional

Sept. 6 – Massachusetts

Sept. 13 – Delaware, New Hampshire, Rhode Island

Nov. 8 - Louisiana