Weekly Legislative Update - April 15, 2019

Washington Update
 
Congress is in recess for the Easter/Passover work period, and won't return until April 29th. 
 
The recess isn't a holiday for the tax staffs, they have orders to prepare bills for when Congress returns, and high on the list is evaluating the tax extenders, including those like WOTC which expire this year. 
 
On Ways and Means, Democrats and Republicans preparing for hearings and markup agree on one thing: enact only extenders of merit, scrub the list. 
 
They're also beginning to reflect on where they want to make changes, and nothing is more risky than a committee where members get to offer whatever amendment they choose: everything is open to revision, and this is the way laws are made. 
 
When Congress returns we can expect WOTC to be scrutinized at a hearing followed by judgments on permanency and perhaps changes to the program.  We can counter negative comments about WOTC in staff reports or hearings, but the larger task is being alert to proposals for adverse changes to the program, especially changes committee members may propose as amendments during markup.  
 
TIA will resume the weekly legislative update after the recess on April 29th. 

Rep. Jason Smith Fires Up Family Business Estate Tax Coalition
Helping lawmakers, especially new members of Congress, get a good handle on the overall importance of your industry is the first step to securing support for repealing the estate tax, Rep. Jason Smith (R-Mo.) recently told several members of the Family Business Estate Tax Coalition.
 
Smith, a seventh-generation Missouri family farm owner who serves on the House Ways and Means Committee and the Budget Committee, along with Rep. Sandford Bishop (D-Ga.), earlier this year introduced the Death Tax Repeal Act (H.R. 218).
 
Smith noted that getting additional support for estate tax repeal legislation, especially from Democratic members, would take time.
 
"A lot of great things don't happen immediately. We can get there, slow and steady," he said optimistically.
 
The 50-plus members of the Family Business Estate Tax Coalition in February sent a letter to Smith, Bishop and Sen. John Thune (R-S.D.), who introduced the Death Tax Repeal Act of 2019 (S. 215) in the Senate, thanking them for their efforts to eliminate the estate tax.

Fact Sheet Supporting Permanent Authorization of WOTC
 
Since 1997, Congress has used the work opportunity tax credit as an incentive to employers to hire workers from narrowly-defined target groups, thereby expanding opportunity for those facing poverty, stigma, or other barriers to employment. We believe WOTC has proven its worth and should be made permanent. Evidence-based results speak for themselves: each year more than 2 million unemployed public assistance recipients (TANF, SNAP, SSDI, SSI), veterans, disconnected youth, and residents of high-poverty areas of cities and counties find jobs by checking a box on a one-page form accompanying their job application. State workforce agencies must verify each worker's eligibility before employers can claim the tax credit, making WOTC consistently free of fraud and abuse. WOTC has been proven to be the Federal government's most cost-effective jobs program, costing a maximum of $1,900 per job for most workers, private employers pay the rest, pumping income into local communities. A study by the University of Pennsylvania's Wharton School shows that saving on public assistance from WOTC is more than twice the ten-year cost estimated by the Joint Committee on Taxation at around $19 billion. The credit is capped, and an employer can take it only once for the same worker.
 
Workers hired using WOTC are mostly under 30, with low skills or less education from dropping out of school. For many, family dissolution, homelessness, and discouragement contribute to a history of intermittent work and low earnings. The population most at risk of stagnating in high-poverty communities is daunting: nearly 20 million have poor job readiness or disabilities, according to BLS. Still, research finds most of the low-earning population are highly motivated to work. Every job is a critical lifeline for these workers because having a job, staying healthy, and studying has been shown to be the route to higher earnings. WOTC offers a better chance for a job, and in conjunction with the earned income and child tax credits, forms the cornerstone of the social safety net. Looking at the bottom decile of workers with lowest average weekly wages-11 million altogether, including 2 million single parents, we find WOTC hires account for an estimated 28 percent of those employed. WOTC reaches workers most in need of a job-those on welfare or living in depressed areas-and has a high take-up rate,
 
Department of Labor data for fiscal year 2013 (the last year available), when there were 1.6 million WOTC hires, show 600,000 hired above $9 an hour, the rest below $9. Thirty percent were in sales occupations, 22 percent in production including manufacturing, 19 percent in office administration, 17 percent in food preparation and serving, 5 percent in healthcare, and 2 percent in buildings and grounds maintenance. Overall, WOTC workers were distributed in 23 occupations representing all major sectors of the economy; WOTC jobs are not dominated by food service and hospitality sectors.
 
Moreover, WOTC is the only jobs program, of the many models that Congress has studied, that's demonstrated an ability to reach a scale in hiring appropriate to the large size of the disadvantaged population without ballooning the cost. Attractive models that rely on mentoring, testing, and intensive skills training have produced quality results, but these programs are labor-intensive, their reach and output are invariably low, and cost per worker many times that of WOTC, where individuals start with a job and advance with education. In fact, WOTC is often used to obtain jobs for those who graduate from special training programs. City and county welfare and economic development agencies, which are at the cutting edge of training TANF and other low-income populations, say they need WOTC for job placement after training.
 
WOTC is adaptable to new labor market challenges, as demonstrated by the explosion of veterans' hires after enactment of the VOW To Hire Heroes Act jobs credits, and its use to spur recovery in disaster areas, high-poverty urban neighborhoods, and hundreds of rural counties with depressed economies. It's sometimes alleged that, because employers have a vacancy that must be filled, those vacancies will go to people on public assistance, disconnected youth, the disabled, or newly-discharged veterans, without the need for WOTC. This doesn't square with the facts. Any job seeker can verify that he or she must compete for a job, often against people with more education, a stable home, and money for getting to work, compared to coming from poor schools, living in subsidized housing, and needing bus money that leaves less for food. Without WOTC, hiring managers will choose the most promising worker, and those on public assistance or stigmatized will lose the competition and often stop looking for work. Most often, non-disadvantaged applicants outnumber the disadvantaged by 2:1 to 4:1; WOTC levels the playing field.
 
Nor does a low national unemployment rate mean WOTC is unnecessary. Governors have designated thousands of low-income neighborhoods as Opportunity Zones, in both urban and rural areas, to deal with persistent poverty and decline through location-based solutions. By lowering the cost of a job to employers and boosting demand for labor, WOTC can complement investors' capital and catalyze area renewal. WOTC's ability to increase employment in the zone helps attract capital, and the synergy between capital and labor can boost productivity and purchasing power, helping to restore a community's economic vitality.
 
Please work with Congress to assure WOTC is made permanent to make it more effective creating jobs for veterans, people with disabilities, those on public assistance, and depressed neighborhoods of cities and counties. Other components of the social safety net are essentially permanent; WOTC should be permanent too.

TIA Supports the Main Street Tax Certainty Act of 2019
 
TIA strongly supports H.R. 216, the Main Street Tax Certainty Act of 2019, which would make permanent the Section 199A 20 percent qualified business income deduction.
 
Led by Representatives Jason Smith (MO) and Henry Cuellar (TX) in the House and Senator Steve Daines (MT) in the Senate, this bipartisan legislation will help ensure permanent tax relief for the millions of employers organized as S corporations, partnerships and sole proprietorships. 
 
These Main Street employers are the backbone of the American economy - they employ the majority of U.S. workers and represent 95 percent of all businesses.
Despite the economic importance of the pass-through sector, the Section 199A deduction is scheduled to sunset at the end of 2025. 
 
Repealing this sunset will benefit millions of pass-through businesses, leading to higher economic growth and more employment. Economists Robert Barro and Jason Furman found that making the pass-through deduction permanent would result in a significant increase in economic growth. The American Action Forum found similar results.
 
The sooner Congress acts to make Section 199A permanent, the sooner the economy and TIA members will benefit.