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Federal Policy Update - August 25

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Tax Reform and Administration’s Priorities for Tax Reform by Year End: Gary Cohn, Director of the National Economic Council, shared with Financial Times that President Trump is pushing to pass tax reform by the end of the year and that Trump’s agenda and calendar will revolved around getting it done. He also detailed the administration’s priorities on tax reform, which are similar to those identified in the White House’s one page statement of principles released in April. Some of President Trump’s priorities include reducing the tax rate as low as possible, eliminating the estate tax, and preserving only three individual deductions (mortgage interest, charitable giving, and retirement contributions).

Estate Tax and Charitable Giving: The top administration and congressional leaders negotiating tax reform have supported repealing the estate tax as a part of tax reform; however, Bloomberg reports on how such a repeal would negatively impact charitable giving.“ In 2010, when the estate tax was temporarily repealed, gross charitable bequests in IRS tax filings totaled $7.49 billion -- a 37 percent drop from $11.9 billion the previous year. The tax returned in 2011, and charitable bequests soared to $14.36 billion. William Gale, co-director of the Urban-Brookings Tax Policy Center, said there’s “no argument” that the estate tax leads to higher charitable giving. “Charitable contributions are highly concentrated among very wealthy households,” he said. “It encourages people to give during life as well.” “Killing the death tax is the perfect example of why tax reform is hard,” said Sage Eastman, a Republican strategist and former counselor to the Ways and Means Committee. “It sounds great and has a good coalition behind it, but then you run into policy nuances like how it impacts the insurance industry and charitable giving.”

Tax Reform or Tax Cuts: Bloomberg BNA reports, “Businesses are apprehensive that lawmakers could downgrade many of the changes they're hoping to see in tax reform to short-term tax cuts that won't grow company profits in the long run.” While congressional leadership has pressed for permanence, many analysts and staffers are placing their bets on temporary tax cuts given disagreements over how to pay for the proposed provisions on reduced tax rates and expensing. CNBC reports that analysts state that there is a far better chance for tax cuts than major reform and that the probability of tax cuts have gone up, rather than down. Political pressures on House and Senate Republicans will force them to seek legislative accomplishments and they will push to find agreement on tax reform.

Challenges for Tax Reform: Politico reports on why tax reform will be just, if not more, as difficult than health care reform. As Congress reconvenes in September, they will face an agenda filled with “must pass” legislation, including the debt ceiling and FY 2018 funding. Second, Republicans have yet to pass a budget resolution for FY 2018, which would include reconciliation instructions - Republicans’ vehicle to advance tax reform. Additionally, Republicans will unlikely have enough consensus about the details of changes to the tax code and how to pay for the changes given impacts to the deficit and tradeoffs for businesses and individuals.

Labor

Wages:

Higher Minimum Wage Impacts on Human Labor: Forbes contributor argues, “If we raise the minimum wage then we'll be encouraging people to use more machines and less human labour.” This is supported by a recent report People Versus Machines: The Impact of Minimum Wages on Automatable Jobs by Grace Lordan, associate professor in health economics at the London School of Economics, and David Neumark, professor of economics at the University of California, Irvine that showed that raising the minimum wage may have unintended consequences by increasing the chance employers will automate low-skilled jobs away, according to a paper published this week through.

REMINDER - DOL’s Call for Public Comment on the Overtime Rule: The Department of Labor released a Request for Information (RFI) on July 26, proposing questions for public comment on revising the Obama administration’s rule to expand overtime eligibility. The public has 60 days to submit their suggestions on the rule. To note, the overtime rule has never taken effect because of litigation and, pending on the outcome of Fifth Circuit’s decision, the Trump administration is beginning to deliver on its promise to revisit the rule through this RFI. The RFI is considered a first step to gather advice on an eventual proposal that would set a new salary threshold higher than the current $24,000 level but lower than the $47,000 figure set under the Obama administration. During Secretary Acosta’s confirmation hearing, he said that he might be comfortable with a salary threshold in the low $30,000 range to account for inflation in recent years. The scope of the RFI includes questions and issues beyond the salary threshold as well. Some of the questions include: Should the 2004 salary test be updated based on inflation? If so, which measure of inflation? Would duties test changes be necessary if the increase was based on inflation? Would a duties-only test be preferable to the current model? Were there specific industries/positions impacted? Which ones?

Menu Labeling:

FDA Commissioner Gottlieb announced on August 25 that the FDA will issue new guidance by end of 2017 on its menu labeling requirements to help businesses in compliance. The menu labeling rule, required under the Affordable Care Act, requires chain restaurants and other businesses like movie theaters and grocery stores with more than 20 locations to post calorie counts on their menus. Gottlieb states, “As a doctor, father and the head of the U.S. Food & Drug Administration, I believe that everyone is entitled to the information they need to make informed decisions about the food they eat. We serve as the nation’s expert on food labeling, which is why Congress entrusted us with the responsibility of crafting predictable, uniform federal standards that will benefit the health of families across America by ensuring access to essential calorie and nutrition information on food and menu labels. Americans should not have to navigate variable information about the foods they eat when traveling from state to state—or city to city. Inconsistent state and local requirements may also drive up the cost of food, and sow confusion, by requiring restaurants and other covered establishments to post different information based on location. I am pleased to announce that we will provide additional, practical guidance on the menu labeling requirements by the end of this year. This additional guidance will address concerns that were raised about challenges establishments faced in understanding how to meet their obligations under the new regulations. We have been diligently working to address the comments we received, and to establish a sustainable framework for enabling establishments to effectively meet the new menu labeling provisions. These new policy steps should allow covered establishments to implement the requirements by next year’s compliance date. ”The new compliance date is set for May 8, 2018 after the Trump administration pushed it back a year this past May. While some associations like the National Grocers Association and the National Association of Convenience Stores supported the delay in compliance date, consumer groups and the National Restaurant Association (NRA) opposed it. The NRA opposed the delay to avoid a patchwork of state and local rules.

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