Week Ending April 28, 2017
Congress has yet to finalize funding for the current fiscal year which began last October. A temporary funding measure that continued funding through April 28 was extended another week by Congress on Friday. To reach a final deal on FY 2017 spending, a number of issues must be resolved, including final levels for defense and nondefense spending, Medicaid funding for Puerto Rico, funding under the Affordable Care Act (ACA) as well as a host of unrelated policy measures, or poison-pill riders, that congressional Republicans insist on adding to the bill. Poison-pill riders include measures to roll back Obama regulations protecting workers’ retirement savings, protecting consumer financial safeguards, requiring campaign finance reporting by corporations, and addressing clean air and water. It appears that the Trump administration has dropped demands for funding construction of a border wall. It is expected that a final package will be completed by next week.
AFSCME continues to push for a bill that funds public services, provides Medicaid resources for Puerto Rico, continues the ACA funding and excludes poison-pill riders.
The White House released a one-page outline of tax principles at a press conference with Secretary of Treasury Steve Mnuchin and White House National Economic Director Gary Cohn (see Cohn blog post). The White House blueprint will guide negotiations with Congress toward developing a new tax cut plan over the coming months. Many specific details are lacking, but the size of the tax cut for the wealthy and big corporations is expected to add greatly to the deficit and the debt. AFSCME strongly opposes this tax plan as a giveaway of tax breaks to the wealthiest 2% and large profitable corporations. AFSCME President Lee Saunders said of the plan; “Compared to the windfall for millionaires, billionaires and corporations, this plan offers precious little to those who have been forgotten, to the working families who are the backbone of our economy…Enough of the same old recycled trickle-down schemes that voters have consistently rejected.
Among the biggest winners are large profitable corporations. The centerpiece of the plan is a massive reduction in corporate tax rates, from 35% to 15%, lowering the rate by more than half. This change alone is estimated to add approximately $2.4 trillion to the federal debt over 10 years. The plan continues tax breaks that encourage corporations to send U.S. jobs and profits offshore, known as deferral, which allows corporations to defer paying their taxes for as many years as they want until they bring their profits back to America. According to estimates, corporations currently have $2.6 trillion in profits stashed offshore, on which they owe $750 billion in taxes. The plan also calls for a new territorial tax system where U.S. companies would no longer be subject to U.S. taxes on offshore profits.
Other big winners include wealthy individuals whose tax rates would be reduced or those who derive their income from business dealings. The plan reduces the tax rate for hedge funds, real estate firms and many other “pass through” businesses. The tax rate for these business owners would be reduced from 40% to 15% -- far less than many middle-class families pay, losing up to $1.5 trillion over 10 years. The overall plan makes individual taxes less progressive. It reduces the number of tax brackets from 7 to 3 (10%, 25%, and 35% -- the highest rate is now 39.6%), and is projected to provide huge tax breaks to the wealthiest 2% and very little for working families. It doubles the individual standard deduction that Americans can claim from the current level of $6,300 for individuals and $12,600 for married couple joint filers, but it eliminates the personal exemption, making the impact on families more uncertain. In addition, it eliminates entirely the estate tax that wealthy individuals currently pay.
Additional provisions eliminate all federal tax deductions for individuals except for mortgage and charitable contributions, including the existing federal deduction for state and local taxes. Elimination of the state and local deduction would increase pressure on state and local governments to reduce taxes, especially on the wealthy, and lead to a loss of revenues for public services. The plan would also eliminate the Alternative Minimum Tax on individuals, which is used to ensure that the wealthy pay their fair share of taxes or at least a minimum tax. And, it would repeal the Obamacare 3.8% tax on individual’s investment income, which costs more than $100 billion (over 10 years) and was part of the House GOP’s most recent “repeal and replace” plan.
The new Trump tax plan is expected to add at least $5 trillion to the federal debt. Many Republicans in Congress remain skeptical of any tax plan that adds to the deficit. The administration claims these lost revenues will be made up in expanded economic growth, but that hasn’t been the case with past large tax cuts of this size and composition. Economists at the Economic Policy Institute (EPI) say clearly “the tax cuts will not pay for themselves” and amount to “pure economic innumeracy.” EPI and others claim cutting taxes in the past contributed to a larger deficit and the slowest growth on record.
In March, House GOP leaders had to call off a vote of their bill (H.R. 1628) to repeal the Affordable Care Act (ACA) and cut Medicaid, due to opposition from both wings of their caucus. It was opposed by a group of right wing members who thought it did not go far enough and a number of moderate Republicans who thought it went too far. But negotiations continued with the White House and a new proposal has emerged. As amended, the bill is worse than before. It would still cause 24 million to lose their health care coverage and it would still cut federal Medicaid payments to the states by $880 billion. But now, the bill would allow states to eliminate protections for people with pre-existing conditions. The bill would also allow states to eliminate the ACA’s prohibition on annual and lifetime limits on insurance provided by employers.
Because of the changes, most of the right wing members have now endorsed the bill. Some moderates remain opposed, but a number are on the fence. The GOP leadership is pressing their caucus very hard to line up the votes for the bill. There are reports that they are threatening committee chairs with the loss of their chairmanships if they don’t vote for the bill.
We expect a vote to be scheduled next week, if GOP leaders think they are close to having enough votes. Every House Democrat is expected to oppose the bill.
On Thursday, by a vote of 60 to 38, the Senate confirmed Alex Acosta to be the next Secretary of Labor. Acosta’s name was submitted after President Trump’s first nominee, fast food tycoon Andy Puzder, withdrew his name from consideration amid controversy over his background, personal life, and hostility for basic worker rights.
Once sworn in, Acosta’s first challenge will be to manage the Labor Department’s proposed budget cuts while making good on the campaign promise Trump made to prioritize working people and their families. In the President’s FY 2018 budget, he slashes funding for the Department of Labor by 21% which is an overall cut of $2.5 billion from current spending. These cuts would reduce federal grants to states to carry out labor programs, reduce job training funds and further weaken enforcement of workplace safety and minimum wage and overtime requirements.
Acosta will also be involved in the administration’s decision over whether to challenge a court ruling that blocked an Obama administration’s update of overtime rules that expanded overtime protections to millions of low-wage workers. The lawsuit challenging the overtime rule was brought by business interests and Republican attorneys general.
U.S. District Judge William Orrick issued a preliminary injunction this week against President Trump’s executive order (EO), issued in late January, to deny federal law enforcement grants to so-called sanctuary cities. This most recent injunction is yet another blow to the President’s anti-immigrant policies.
On February 20, Secretary of Homeland Security John Kelly issued guidance on the EO but omitted a definition of “sanctuary cities,” instead placing focus on the new administration’s enforcement priorities. This directive made clear the administration would restore the Secure Communities Program, which was phased out during the Obama administration due to numerous concerns over the violation of Constitutional protections.
AFSCME opposes piecemeal enforcement policy, urging Congress and this administration to instead, enact comprehensive immigration reform. We are also concerned that the President’s enforcement programs place considerable administrative and financial burden on local communities, without support from the federal government. Further, the administration’s refusal to provide grants to any community that doesn’t follow a cookie-cutter enforcement program undermines the ability of local law enforcement agencies to maintain public safety based on local circumstances.
On Wednesday, the House Education and the Workforce Committee voted to advance the so-called Working Families Flexibility Act (H.R. 1180), a bill that allows private sector employers to substitute compensatory time in lieu of overtime pay for their workers. Under the bill, employers would decide when employees could take the time off they earned and could deny workers the use of comp time to care for their families or plan a vacation if it conflicts with the needs of the business. The bill would roll back the guarantee of time and a half pay for overtime hours that has protected private sector workers for nearly 80 years.
This bill was approved by the committee in a party-line vote of 22 to 16. It is expected to be voted upon by the full House next week. AFSCME strongly opposes this bill. Contact your representative today and say no to H.R. 1180.
This week, Sens. Sherrod Brown (D-OH) and Susan Collins (R-ME) introduced the Social Security Fairness Act (S. 915) to fully repeal the GPO-WEP. The GPO-WEP provisions in the Social Security Act unfairly reduce Social Security benefits for some public sector workers. In a statement, Brown said, “These [public service workers] have taught Ohio children and kept Ohio communities safe, and it’s up to us to make sure they can retire with their full Social Security benefits.” He went on to say, “It’s not just about the workers – their families suffer the consequences of reduced benefits, too. This small fix will help these workers and their families have the peace of mind that their Social Security benefits will be there for them when they retire from a life dedicated to serving our communities.”
AFSCME supports full repeal of the GPO-WEP to protect and preserve Social Security benefits for retirees who have worked hard and played by the rules.
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