Week Ending December 9, 2011
Senate to Vote on Balanced Budget Amendment
As required by the Budget Control Act, the Senate must vote on a balanced budget amendment (BBA) before adjourning for the year. It is expected that the vote will be next week, centering on S.J. Res. 23, introduced by Sen. Orrin Hatch (R-UT) and backed by all 48 Senate Republicans. This draconian constitutional amendment would require even deeper cuts than the House-passed budget from earlier this year and risks serious harm to the economy, particularly when the economy is weak. Overall, S.J. Res. 23 would cap spending at 18% of the economy from the previous year, cutting all programs spanning Social Security, Medicare, Medicaid, Children's Health Insurance, education, veterans' care, and even defense by an average of one-quarter by 2018. This version of a BBA also requires supermajorities of 3/5 to raise the debt ceiling and 2/3 to raise taxes. It is also expected that Sen. Mark Udall (D-CO) will offer an alternative BBA, S.J. Res 24, that would not require supermajority votes to raise taxes or the debt ceiling and would not cap spending. The Udall amendment would also carve out Social Security to protect it from harmful cuts. However, it does not protect other critical safety net programs and poses a particular threat to the future of Medicare and Medicaid. AFSCME is strongly opposing all versions of a BBA. We urge you to call 202- 224-3121 to urge your Senator to vote no on any BBA, including S.J. Res. 23.
Senate Again Rejects Payroll Tax Cut Extension
By a vote of 50-48, senators failed to close off debate and rejected another plan to reduce the employee share of the payroll tax to 3.1% for 2012. The plan would have been paid for through a tax surcharge on millionaires. But, unlike an earlier proposal, it would not have reduced the tax employers pay as originally proposed by President Obama. A two-percentage point cut in the Social Security payroll tax was enacted last year and is set to expire at the end of the year. So far, Democrats and Republicans have been unable to reach agreement on a joint plan. Senators also rejected, by a vote of 22-76, a Republican plan that would continue the existing 2% tax cut with different spending offsets, including an extension of the current pay freeze for federal workers and a reduction in the federal civilian work force. House Republicans have floated yet another plan that includes, along with the 2% payroll tax extension, several other unrelated “must pass” items including the continuation of the federal extended unemployment insurance (UI) benefits program, preventing a cut the Medicare physicians payment, and a number of other expiring tax provisions. This plan would cost $192.5 billion and require even more offsets, which would come from further cuts in federal spending and holding up implementation of health care reforms.
Senate Republicans Block Vote on Obama Nominee, Richard Cordray, to be Director of Consumer Financial Protection Bureau (CFPB)
The Senate voted 53-45 along party lines to block a vote on the confirmation of President Obama’s nominee, Richard Cordray, to lead the Consumer Financial Protection Bureau (CFPB). Every Democrat voted to proceed to a vote on Cordray and 45 of 47 Republicans opposed (Sen. Scott Brown (R-MA) voted yes and Sen. Olympia Snowe (R-ME) voted present). Sixty affirmative votes were needed to proceed to a vote on Cordray’s actual nomination. While Senate Republican leaders acknowledge Cordray is qualified, nearly all oppose government enforcement of new consumer protections and have vowed to oppose Cordray or any other nominee until CFPB’s governance structure is radically changed. Republican leaders seek to leverage their opposition to achieve three main goals to weaken CFPB’s governance structure; to limit CFPB’s financial resources; and to impose congressional oversight of CFPB.
Cordray is strongly supported by a broad coalition of labor unions, consumer groups, and financial reform advocates and state elected and appointed officials. For example, a bipartisan group of 37 state attorneys general wrote a support letter that stated, “…he has the knowledge, experience and leadership skills to serve in this important position. He is both brilliant and balanced.” Cordray has long advocated for working families, most recently leading CFPB’s enforcement division. AFSCME strongly supports Cordray’s nomination.
The historic 2010 Dodd-Frank financial reform law, championed by President Obama and Democratic congressional leaders, created the CFPB. It is important to working families because it protects consumers’ financial transactions by ensuring a fair, transparent and efficient marketplace for important financial products, such as credit cards, student loans, credit scores and home mortgages.
Affordable Care Act Expands Children’s Health Insurance Program to State Employees
A lesser-known but important provision in the Affordable Care Act (ACA) removed a 13-year ban on state employees enrolling their children in the federal Children’s Health Insurance Program (CHIP). This provision of the ACA has the potential to help state budgets, increase the household incomes of thousands of low-wage state workers, and reduce the number of uninsured children. But so far, only six states (AL, GA, KY, MT, PA, and TX) have requested and received federal approval to make CHIP available to their state employees and their families. While the benefits of extending CHIP coverage to state employees vary by state, the vast majority would see budget savings, substantial savings in health care costs for families, and a drop in uninsured children. AFSCME encourages more states to evaluate the benefits of availing themselves of this provision of the ACA, and to take the necessary steps to gain federal approval.
Large Profitable Corporations Dodge State Taxes
A new comprehensive report by Citizens for Tax Justice and the Institute on Taxation and Economic Policy analyzes taxes paid by 265 large consistently profitable Fortune 500 companies. The report finds that more that 25% paid no state corporate income tax at least one of the last three years and that 20 of these companies averaged no tax payments during 2008-2010. During 2008-2010, the report concludes these 265 corporations cost states $42.7 billion in lost revenues. Some of the 20 corporations paying zero or less state corporate income taxes in 2008-2010 are utility provider Pepco Holdings (DC); pharmaceutical giant Baxter International (IL); chemical maker DuPont (DE); fast food behemoth Yum Brands (KY); and high tech manufacturer Intel (CA).
The report notes three main causes for the 20-year steady decline of state corporate tax revenues. First, states frequently enact tax subsidies requested by corporations even though most fail to produce promised benefits. Second, federal tax breaks enacted over the last 10 years reduce state corporate income tax revenues since states typically accept corporate federal tax numbers. Third, multi-state corporations dedicate their own dollars and lawyers to develop and implement tax avoidance schemes. The report summarizes corporations’ tax avoidance and profit-shifting strategies. It also lists reforms that state governments could immediately implement to ensure profitable corporations in a state pay closer to the statutory corporate tax rate. For example, states should increase disclosure, transparency and accountability, in addition to requiring corporations to report publicly their in-state profits, subsidies or loopholes they exploit. States could also decouple from federal tax loopholes, such as bonus depreciation and provisions reducing the amount of taxable income corporations claimed in their state tax filings.
The report is titled, “Corporate Tax Dodging in the Fifty States, 2008-2010”. AFSCME is working with its affiliates and other progressive state and local organizations to publicize this report.
2012 Funding Bills Face December 16 Deadline
Nine of the 12 annual FY 2012 bills funding federal government programs remain to be finalized before the December 16 expiration of the current stop-gap measure. While negotiations continue, it appears that most of the bills will be packaged together into a single mega-bill. Further complicating matters, Republicans have threatened to attach harmful policy riders that could block funding for important programs such as health care reform implementation. If an overall agreement is not reached, Congress will have to approve yet another temporary spending measure through the end of year.
Bipartisan Congressional Support Grows to Close Sales Tax Loopholes on Remote and Online Sellers
There is growing bipartisan congressional support for legislation that enables state and local governments to require online and remote sellers from another state to collect sales and use taxes on goods and services. These proposals would close existing loopholes that allow many businesses to avoid collecting sales tax on purchases made via mail, telephone, and the internet, which harms state and local government budgets and unfairly disadvantages Main Street and mom-and-pop retailers. According to BNA Daily Tax Report, “as much as $23 billion in revenues for the year 2012 will go uncollected”.
Last month, a bipartisan group of senators introduced the Marketplace Fairness Act (S. 1832) which accomplishes these goals. A companion House bill will likely be introduced soon. Earlier this summer, similar legislation was introduced in the House and Senate by Rep. John Conyers (R-MI) and Sen. Dick Durbin (D-IL). AFSCME supports these bills. In addition to AFSCME and other labor organizations, these bills are also supported by organizations representing state and local governments, including National Governors Association, National Conference of State Legislatures, National League of Cities, National Association of Counties, and U.S. Conference of Mayors.
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