Tax Reform the Talk of Fly-in

More than 100 of the state’s top business leaders descended on D.C. this week for the Indiana Chamber’s Fly-in event with our congressional delegation.

Attendees received meaningful and timely information from their representatives and senators through policy briefings, special dinner discussions and office visits.

Tax reform was the hot topic. How ironic that while we were D.C.-bound that President Donald Trump would be heading to Indianapolis to roll out his tax reform plan for the first time, and taking nearly half of the Indiana delegation with him on Air Force One for the announcement. But almost all Hoosier delegation members made it back in time to address their business constituents.

The tax reform message the Indiana Chamber contingent delivered to lawmakers in D.C. was that failure should not be an option – this needs to get done!

Senator Rob Portman of Ohio wraps up his remarks on tax reform – turning the floor over to Sen. Todd Young and Sen. Joe Donnelly for a Q&A session.

What caught our attention was how deeply committed everyone is to have tax reform cross the finish line. We felt that from our guest speaker, Sen. Rob Portman of Ohio, considered the Senate fiscal expert, to Indiana members in the House and Senate, including Democratic Sen. Joe Donnelly.

They know it’s important not only to them politically but they also realize that it’s much needed policy.

President Trump’s tax reform framework, which assuredly was done in tandem with congressional leaders, includes actions that the Indiana Chamber and business community at-large have been championing for some time:

• Lowering the corporate tax rate from 35% – the highest in the world today, which drives investment, jobs and even corporate headquarters overseas
• Lowering the top personal income tax rate – which now offers disincentives for initiative, investment and risk-taking while reducing the number of brackets
• Eliminating the alternative minimum tax (AMT), which is overly complex and ineffective, and the estate tax, which endangers many family farms and small businesses
• Adopting a territorial system in which income earned overseas is not taxed in the U.S.

In our Q&A with Sens. Donnelly and Todd Young, they were asked to handicap the likelihood – on a one to 10 scale – of a meaningful tax reform package making it through Congress. Donnelly gave it a fairly hopeful six, while Young said he’s more confident today than even a few months ago and now puts the chances for success at seven-plus.

Young added: “At a time when the rate of business creation is lower than at any period in my own life, I feel like the time is now for tax reform. And the President made a compelling case in what I thought were pretty accessible terms (for Americans).”

Donnelly summed up his thoughts on the matter: “My view on tax reform is simple: I want to try to get to ‘yes’. I think it’s much better if it’s bipartisan. … I think it’s a much better message to the country.”

At our legislative briefing, Congressman Larry Bucshon (IN-08) offered his assessment as well. “As long as both sides don’t go to our corners and stick with our traditional talking points – trying to win an election in 2018 – we are going to get this done.”

Tax reform, if done correctly, would broaden the base while lowering rates across the board – spurring new investment, job creation, economic growth and, ultimately, tax revenues, without increasing the federal deficit.

Our tax code should look like it was designed on purpose for strategic economic growth.
We are hopeful that’s what will happen in the coming months.

A big thank you to our D.C. Fly-in sponsors for making the event possible: Zimmer Biomet (dinner sponsor), Allegion (cocktail reception sponsor), Build Indiana Council (legislative briefing sponsor), AT&T, The Boeing Company, Duke Energy, The Kroger Co., Old National Bank and Wabash Valley Power.

We hope to see everyone who attended – and more – back next year!

100+ Business Leaders Going to D.C. This Week for Chamber Fly-in

A record group of more than 100 of the state’s top business leaders and government affairs executives will be attending the Indiana Chamber’s annual D.C. Fly-in on September 27 and 28. The timing couldn’t be more perfect with a potential health care reform vote, rollout of a tax reform plan and the end of the fiscal year all taking place.

This year, legislative briefings will be conducted by congressional members, who will be highlighting key public policy areas that line up with their committee assignments and expertise:

  • Tax reform – Indiana 2nd District U.S. Rep. Jackie Walorski
  • Regulatory reform – Indiana 9th District U.S. Rep. Trey Hollingsworth
  • Health care reform – Indiana 8th District U.S. Rep. Larry Bucshon
  • Infrastructure and transportation policy – Indiana 4th District U.S. Rep. Todd Rokita
  • Education policy – Indiana 6th District U.S. Rep. Luke Messer

There is still time to register for the D.C. Fly-in; go to www.indianachamber.com/specialevents.

Make sure to follow us on Twitter at @IndianaChamber or #ICCinDC for up-to-the-minute important information on what’s happening in Washington.

Zimmer Biomet is the Fly-in’s dinner sponsor. Allegion is the cocktail reception sponsor. Build Indiana Council is the legislative briefing sponsor.

Event sponsors are AT&T, The Boeing Company, Duke Energy, The Kroger Co., Old National Bank and Wabash Valley Power.

New Senate Health Care Bill An Improvement for Employers

The U.S. Senate appears to be gearing up for another health care vote, with a measure from Sens. Bill Cassidy (R-LA) and Lindsey Graham (R-SC) headed to the floor as soon as the middle of next week.

At its core, the Graham-Cassidy proposal creates a block grant program, taking much of the funding provided in the Affordable Care Act (ACA) and sending it to the states for them to set up their own health care systems and determine where to direct the funds.

It also does away with several pillars of the ACA, including the mandate for individuals to have insurance or pay a penalty. The true ramifications of that are uncertain, but could mean higher premiums for those in the health care exchanges (aka those who don’t have insurance through their workplace).

From the standpoint of employers, the Indiana Chamber believes Graham-Cassidy is an improvement over the ACA. This is primarily due to two changes:

  1. The removal of the employer mandate to offer coverage. If that goes away, so too does the ACA’s definition of a full-time employee as someone working an average of 30 hours per week; this has negatively impacted businesses and workers – many of whom saw their hours reduced.
  1. The permanent elimination of the medical device tax, which is detrimental to vital Hoosier employers like Cook Medical in Bloomington, Zimmer Biomet in Warsaw and many others.

Overall, those in favor of increased state control are more receptive to the Graham-Cassidy effort.

As Vice President Mike Pence put it on Fox News yesterday: “…The question that people ought to ask is, who do you think will be more responsive to the health care needs in your community? Your Governor and your state legislator, or a congressman and a President far off in the nation’s capital?…”

 What has opponents worked up is two-fold: affordable coverage for pre-existing conditions isn’t specifically guaranteed; and population size will determine the amount of the block grant, which will reduce funding for a number of states – including some in the Rust Belt and more rural states in general.

Republican Sen. Jeff Flake of Arizona told MSNBC on Thursday he has absolute faith that governors will keep pre-existing condition protections, because of the severe political cost if they don’t. Opponents are less convinced.

At this point, Kentucky Sen. Rand Paul is the lone Republican who has sworn opposition to the Graham-Cassidy bill publicly – in part because his state appears to be set to lose funds in this model.

Likewise, Indiana is expected to see less federal dollars, but the Hoosier state has been preparing for what it saw as an eventuality for several years – setting aside hundreds of millions of dollars to subsidize its Healthy Indiana Plan (HIP) 2.0.

The HIP model is unique in the country; it requires participants to have “skin in the game” with their health care decisions and allows for capping the number of participants. Both of these make it an inherently more nimble program. And ultimately, the state Legislature can also determine to put more funds into HIP 2.0, if it’s deemed necessary.

These facts and the lure of more state control were likely factors in Gov. Eric Holcomb’s decision to sign a letter supporting Graham-Cassidy; he was one of 15 state executives to do so. The reality is other states may not be as fiscally prepared for a possible funding reduction as Indiana is.

That leads us to who may end up being the pivotal figure in the floor vote: Sen. Lisa Murkowski of Alaska. She joined Sen. Susan Collins (Maine) and Sen. John McCain (Arizona) in voting no on the last health care reform measure. Collins is seen as a likely “no” again, joining Paul, while McCain is a predicted (or at least hoped for) “yes.”

As a result, the bill authors are pulling out all the stops and making special accommodations for Alaska in the bill to woo Murkowski’s vote – because they can’t lose her and have the bill survive for Vice President Pence to break the tie. If no specific provisions for Alaska are made, the state would be a big loser in the bill in funding because of its size vs. population and geography.

The Indiana Chamber plans to talk about health care reform with Sen. Joe Donnelly, who has announced his opposition to Graham-Cassidy, and Republican Sen. Todd Young during Wednesday’s D.C. Fly-in event.

UPDATE: This afternoon, McCain announced he would oppose the Graham-Cassidy bill, making passage of the bill seemingly very difficult.

Commentary and Background on the DACA Decision 

President Trump announced last week via U.S. Attorney General Jeff Sessions that he is ending the Deferred Action for Childhood Arrivals (DACA) program that President Obama instituted in 2012 by executive order. DACA allows for certain illegal immigrants who entered the country as minors to receive a renewable two-year period of deferred action from deportation and eligibility for a work permit.

Under this decision, the U.S. Department of Homeland Security will rescind the executive order that established DACA and not accept new program applicants. It puts 800,000 “dreamers” (including an estimated 10,000 Hoosiers) – children who arrived in the U.S. illegally with their parents at a young age – into legal limbo until it takes effect March 2018. This is an unfortunate turn of events for a demographic group where 90% are either in college or working.

As a result, 15 state attorneys general (all Democrats) filed suit this week to block the President’s plan to end DACA.

During the announcement, Sessions commented that actions under the Obama administration were unconstitutional and that the program should be enacted by Congress. Even Sen. Dianne Feinstein (D-CA) implied that President Obama’s executive order to protect young immigrants brought here as minors was on shaky legal ground and that is why Congress must act.

Over the next six months, President Trump is counting on Congress to do just that and essentially fix the DACA situation once and for all.

The Indiana Chamber believes lawmakers must address the issue as part of a larger immigration reform package, but it remains unclear whether both sides can compromise to reach a solution. Some are adamant that they will not accept any deal to fund even small amounts of a border wall or increased immigration enforcement, and cuts to legal immigration would be unacceptable. Other members of Congress are saying you need to pass this as part of border security, while a contingent believes you need to pass this on its own – which makes the possibility of its success very difficult.

On Wednesday, Sen. Tom Cotton (R-AR) said he was open to adding legal status for DACA recipients to his RAISE Act legislation – the goal of which is to build a skills-based immigration system similar to Canada or Australia while decreasing the amount of legal immigration overall.

Indiana’s senators Joe Donnelly and Todd Young reacted to the DACA news.
“Our country is still in need of reforms to fix our immigration system and strengthen border security, but in the interim we should pass bipartisan legislation to give these young people, who were brought here through no fault of their own, some stability and clarity,” Donnelly said.

“Upending existing protections for the nearly 10,000 young people in Indiana who have been here for most of their lives isn’t the path we should take.” Young stated: “I continue to believe we must secure our southern border and fix our broken immigration system. Irrespective of (the Trump) announcement, that requires a bipartisan solution in Congress that reforms our legal immigration system, prevents illegal immigration and addresses the question of what to do with undocumented men, women and children already here.”

BACKGROUND

So how did we get to this point with DACA and immigration? It’s been many years in the making. Attempts to address illegal immigrants who entered this country as minors date back to as early as 2001.

In 2007, the DREAM (Development, Relief and Education for Alien Minors) Act was introduced in the Senate. The Act allowed for a process by which qualifying alien minors would first be granted conditional residency. Eventually, by meeting further qualifications, permanent residency status could be obtained. It failed to be brought up in debate for lack of a filibuster-proof 60 votes. In 2009, it was reintroduced in both the Senate and House, and provided for qualifying immigrants who were between the ages of 12 and 35 at the time of enactment; who arrived in the U.S. before 16 years of age; resided continuously in the U.S. for five years; graduated from high school or obtained a GED; and were of good moral character. The bill continued debate into 2010 when the House passed a version, but the bill again failed to reach the 60-vote threshold in the Senate. Unsuccessful attempts were made in 2011 as well.

As a result of Congress’ inability to pass legislation, the Obama administration by executive order implemented the policy position of DACA in June 2012.
In 2013, the U.S. Senate’s “Gang of Eight” passed a comprehensive immigration reform bill in the Senate. In 2014, the House indicated it had the votes to pass the bill. However, when House Majority Leader Eric Cantor lost his primary election, House Speaker John Boehner announced that the House would not bring the bill to a vote. As a result, President Obama promised to fix the immigration system as much as possible on his own without Congress and attempted to expand DACA to include the parents (known as DAPA) of these minors. In a memorandum to ICE (U.S. Immigration and Customs Enforcement), aliens without criminal histories were to be made the lowest priority and that illegal immigrants who are the parents of U.S. citizens or lawful permanent residents were to be granted deferred action.

Subsequently, the Texas attorney general – joined by 25 other Republican-led states, including Indiana – sued in federal court in Texas to prevent implementation of the expansion. The case eventually worked its way to the U.S. Supreme Court and in June of 2016, a deadlocked 4-4 decision stated that: “The judgement is affirmed by an equally divided court.”  The ruling set no precedent and simply left in place the lower court’s preliminary injunction blocking the program.

Earlier this summer, on June 15, 2017, then Homeland Security Secretary John F. Kelly signed a memo rescinding DAPA. At that time, it was clarified that the memo did not include DACA and the Trump administration had not decided on whether it would keep that policy in place.

Which brings us to action last week on September 5. Attorney generals from nine states – led by Texas – notified the Justice Department that they would amend the current DAPA lawsuit to include DACA if executive action wasn’t taken by September 5 to phase it out, which prompted the announcement by U.S. Attorney General Jeff Session.

What’s Up With Federal Tax Reform

Is anything really happening? Yes.
Will something eventually get passed? Probably.

A group of key individuals who dubbed themselves the “Big 6” has been meeting for a few months and more intently in recent weeks. They include two members each from the administration (Treasury Secretary Steven Mnuchin, National Economic Council Director Gary Cohn), Senate (Majority Leader Mitch McConnell and Finance Committee Chair Orrin Hatch) and House (Speaker Paul Ryan and Ways and Means Chair Kevin Brady.)

Are they motivated to find common ground? Certainly. Is there a consensus? Not yet. Right now, they don’t even agree on whether, or to what extent, the legislation must be revenue neutral.

But they all seem to recognize that they need to do something – failure to coalesce is not in anyone’s interest. So what have they agreed on so far? The border-adjustment tax is out. Some method for allowing the repatriation of overseas earnings (at a one-time low-rate tax) is in. The corporate rate must drop to 25% or less (depending on how many deductions and breaks they can eliminate.) They appear to be embracing a way to allow small businesses to immediately deduct investments in new equipment and facilities, i.e. “full expensing.” On the individual income side, a collapsing of the brackets and lowering of rates (no details.)

Possible tradeoffs or “pay-fors” in tax circles: eliminating some business interest deductions, eliminating the state and local tax (SALT) deductions and capping the mortgage interest deduction. These are yet unsettled issues. But listen and watch closely to the SALT discussions going forward; there is a lot of money and a lot of political (with a small p) interest in this item. It is more a geographic than partisan issue because taking the SALT deduction away will have a significant negative impact on people (constituents of Republicans and Democrats) in states that have high state and local taxes. This item could have a big bearing on the entire effort and whether we get true reform or temporary tax cuts.

Tax cuts are the easy part for these folks. The hard part is finding ways to pay for reductions. The last true tax reform was in 1986, 31 years ago, and it required a lot of time and bipartisan buy-in. The Big 6 are all Republicans and they are anxious to get something done. They could mimic the Bush tax cuts of 2002 and 2003, passed through the reconciliation process, which means whatever they do expires after 10 years. Somewhat ironically, most of those Bush cuts were only made permanent as part of the Obama budget deal of 2012.

To recap the status of tax reform: Much remains up in the air.

On the Federal Front: Around the Horn

The U.S. House of Representatives was on a week-long recess, which means our delegation was back home and visiting with their constituents around the state. The Senate, however, remained in D.C. working. Both will continue on the job in Washington starting next week until their recess around Memorial Day. A few news and notes:

* Congressman Larry Bucshon, M.D. (IN-08) held a job fair in Terre Haute on Wednesday in coordination with WorkOne Western Indiana, Indiana State University and the Terre Haute Chamber of Commerce. The event, held at Indiana State University’s Hulman Center, afforded potential employees the opportunity to meet with employers hiring in the Wabash Valley. A special emphasis was given to hiring veterans.

* Bucshon recently attended the Indiana Chamber’s I-69 Regional Summit in downtown Indianapolis. He was fresh from the floor vote in Congress on health care reform and also took time to meet with Chamber executives to discuss the topic.

* Congressman Jim Banks (IN-03), a member of the House Armed Services Committee, issued the following statement on Thursday regarding reports that the Trump Administration is considering sending more American troops to Afghanistan:

“I am glad that President Trump is willing to seriously consider the request of his commanders on the ground, who are asking for additional forces. We’ve been at war in Afghanistan since 2001, but in recent years, decisions about troop levels have been based on politics instead of military strategy. We’ve invested too much blood and treasure in Afghanistan to tolerate a stalemate or defeat. I look forward to learning more about the administration’s plans in the coming days.”

* U.S. Sen. Joe Donnelly has released his Foundation for Families Agenda – a series of policy proposals aimed at improving the quality of life for Hoosier families. Included in the policy agenda:

  • Paid family and medical leave
  • Expanding access to pre-K and quality childcare options
  • Affordable higher education
  • Equal pay for women

Donnelly released a video explaining his agenda. He stated, “I am unveiling the Foundation for Families Agenda because we need to ensure our policies and priorities support hardworking Hoosier and American families. When our families succeed, so
does our economy. The foundation for our families should include family leave, options for affordable childcare and pre-K, access to an affordable college education, and the assurance that Hoosier women are paid equally when they do the same job as their male counterparts. These are common sense ideas that I am hopeful we can advance in a bipartisan manner in the Senate.”

* Many news organizations are speculating that a potential candidate to be the new FBI director might be the current president of Anderson University, John Pistole. Pistole is former deputy director of the FBI (and led significant counter-terrorism efforts) and past head of the Transportation Security Administration. He has declined all requests for interviews since the speculation began, but a few friends and family spoke to the Indy Star.

* Indiana Secretary of State Connie Lawson has been tapped to serve on President Trump’s national commission investigating the integrity of American elections; see The Northwest Indiana Times story. Vice President Mike Pence is chairing the commission.

Budget Deal Reached in Congress – But Process Broken

The House and Senate passed a budget deal to secure federal funding until the end of September 2017 last week. The House passed the funding measure by a vote of 309 to 118 on Wednesday, and the Senate followed suit 79-18. It is important to note that the Indiana delegation was divided – and not by political party – on the $1.1 trillion spending proposal.

Republican House members Jim Banks (IN-03), Trey Hollingsworth (IN-09) and Todd Rokita (IN-04) voted against the measure, while both House Democrat members André Carson (IN-07) and Pete Visclosky (IN-01) voted yes with the rest of the Hoosier delegation.

Congressman Hollingsworth released the following statement after casting his vote against the continuing resolution. “The spending bill that was brought before the House of Representatives today failed, yet again, to address the conservative principles that Hoosiers and Americans demanded to see this past November. For this reason, I voted against the $1.1 trillion spending measure that neglected critical priorities such as our nation’s nearly $20 trillion debt.”

Similarly, Congressman Banks added: “This legislation fails to properly address our $20 trillion national debt and reduce the size and scope of the federal government. As work immediately begins on next year’s spending bills, I am hopeful that Congress will follow the regular budget order and work with the Trump Administration to cut spending and change the Washington status quo.”

Despite passage of this funding measure, negotiations will begin again soon to pass a budget starting October 1 – with many of the same arguments on spending to be rehashed. But this has become all too familiar. Congress has regularly failed to meet the deadlines required by the Congressional Budget Act of 1974 under both Republican and Democrat control. In fact, the last annual federal budget approved by the U.S. Senate was on April 29, 2009. The federal government has operated by enacting these series of continuing resolutions – short-term measures that keep the government running and spending money at previously adopted rates.

The Indiana Chamber believes this is a gross dereliction of duty, as the federal government has spent trillions since the last adopted budget, further adding to the debt.

What the Indiana Chamber would like to see is Congress move from a yearly (or semi-yearly) mad dash to a biennial budget system. This would take much of the politics out of the budget process and would encourage efficiency in the management, stability and predictability of federal funding, especially for Indiana. A biennial budget would also enhance congressional oversight of government operations and encourage better policy planning. Biennial budgets should occur during non-election years to promote bipartisanship (or at least lessen partisan tensions) in the budgetary process. We can dream!

House Off to Fast Tech Start

A brief update on some tech/innovation legislation at the federal level, courtesy of the Chamber Technology Engagement Center.

Women will play an important role in the 21st century workforce. Congress recognized that this week when it passed the INSPIRE Women Act (H.R. 321) to recruit women into STEM fields and encourage their research and work in technology.

With the HALOS Act (H.R. 79), the House removed an important burden to allow for angel investors to support start-ups – a huge growth sector in our economy.

Thanks to the Modernizing Government Travel Act (H.R. 274), government employees will soon be able to travel smarter and more cost effectively, saving taxpayer money thanks to a bill modernizing work travel.

Lastly, with the Support for Rapid Innovation Act of 2017 (H.R. 239), the Department of Homeland Security is now a few steps closer to being able to utilize the best and brightest within agencies and industries to help combat the ever-growing cyber security threats to both government and business.

Around the Horn on Federal Legislative Issues

As part of the Indiana Chamber’s robust federal advocacy program, Caryl Auslander will be working with the Indiana delegation (both in Washington, D.C. and here in Indiana) throughout the year. Look for additional stories and coverage of our federal efforts on your behalf in these reports and through other communications.

Below are some of the top recent Indiana news items:

  • Congressman Trey Hollingsworth spoke on the House floor in support of the REINS Act during his first week on the job; the measure to curb unnecessary government regulation passed the House on Wednesday. Hollingsworth has also been placed on the House Financial Services Committee.
  • A Hoosier connection remains on the House Ways and Means Committee with Rep. Jackie Walorski (IN 2) receiving a nod; Sen. Todd Young was most recently on this important committee.
  • Chairman alert: Rep. Susan Brooks (IN 5) has officially taken the helm of the House Ethics Committee.
  • This week, freshman Rep. Jim Banks (IN 3) presided over the House floor debate of a statement of opposition to the recent U.N. Resolution on Israel; the measure passed the House easily.
  • Newly sworn-in Sen. Young was assigned to four important Senate committees: Foreign Relations; Health, Education, Labor and Pensions; Commerce, Science and Transportation; and Small Business and Entrepreneurship.
  • Retirement is on hold for former Sen. Dan Coats, who was announced as President-elect Donald Trump’s pick for Director of National Intelligence.
  • Indiana’s now senior Sen. Joe Donnelly was awarded the Department of Defense Medal for Distinguished Public Service; Donnelly is a member of the Senate Armed Services Committee.
  • Senators Donnelly and Young were successful in getting the Government Publishing Office to formally designate Indiana residents as “Hoosiers” (bye-bye “Indianans”) and celebrated with this video announcement.
  • South Bend Mayor Pete Buttigieg threw his hat into the ring for chairman of the Democratic National Committee.