“In the Know”
FEI’s Private Company Roundtable Email Update
December 22, 2010
It has been a busy December in Washington. After the major political shakeup in the November midterm elections, Washington came back to life for a rather hectic lame duck session of Congress that is still going strong three days before the Christmas holiday. Major legislation has moved through both chambers of Congress, including the $858 billion package that extended the 2001/2003 marginal tax rates and estate tax (35% rate, $5 million exemption) for an additional two years. Many on the Private Company Roundtable made calls and sent letters on these vital provisions. We are thankful for your support on these keys issues for private companies. To read more on that package, click here.
President Obama’s National Commission on Fiscal Responsibility and Reform released its report in early December. While the report did not gain the support needed to be presented to Congress, it did make some key points on the state of the debt and deficit in the United States. The Issue Analysis section of this email has an in-depth look on what the Commission proposed and discusses the likelihood of the provisions finding new life in various legislative and budget packages in 2011.
As we have mentioned in the past, we are looking for volunteers to serve on the Leadership Advisory Council to help recruit new members to the Roundtable as well as assisting in developing future programming. Please let Tyler Roberts know if that is something you’re interested in learning more about. We look forward to working with each and every one of you on future calls and initiatives.
Please remember to mark your calendar for the January 12, 2011 Roundtable call at 2:00pm eastern time. Details will be sent after the holidays. You can register for the event here.
With 2010 coming to a close, we want to wish you and your families a very happy holiday season and a prosperous 2011. We look forward to working with you in the New Year.
Co-Chair, Private Company Roundtable
Co-Chair, Private Company Roundtable
Issue Analysis: President Obama’s National Commission on Fiscal Responsibility and Reform
In February 2010, President Barack Obama established the National Commission on Fiscal Responsibility and Reform. The Commission was “charged with identifying policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run.” It was made up of a bipartisan group of 18 lawmakers, business officials, and presidential appointees that were tasked with recommending Congress solutions to America’s fiscal trouble. The group took an unusually hard look at spending and focused on entitlements such as Medicare as well as taxes. In order for the final report to be considered by Congress, 14 of the 18 members had to be in favor of the proposal. The Commission released its final report on December 3, 2010. The final vote tally was 11 commissioners in support of the proposal and 7 commissioners against it.
While the proposal was not accepted by the Commission, there was a strong amount of bipartisanship support shown with 60 percent of the group voting in favor – much higher than expected. It is also worth noting that the two business leaders appointed to the Commission, David Cote, the Chief Executive Officer of Honeywell and Anne Fudge, former Chief Executive Office to Young & Rubicam Brands, voted for the proposal.
Major recommendations in the report included:
· A fast-track process to enact by 2012 fundamental tax reform that lowers tax rates, broadens the tax base and simplifies the tax code. This would require Congress to take action by a certain date.
· A suggestion of the elimination of all tax expenditures, dedicating a portion of the revenue to deficit reduction and using the remaining revenue to lower rates and add back certain tax expenditures and credits.
· A reduction of the top individual income tax rate to between 23 and 29 percent (28 percent under an "illustrative" individual tax reform plan), taxing capital gains and dividends at ordinary income tax rates, capping the exclusion for employer-provided health care insurance and reducing the excise tax on so-called "Cadillac" health care plans to 12 percent. The Commission suggested a “sliding scale” of potential tax rates as a realistic approach or quid-pro-quo since it might not be politically feasible to eliminate all tax expenditures (e.g. increase in rate for keeping the Home Mortgage Interest Deduction.)
· A single corporate tax rate between 23 percent and 29 percent (28 percent under an "illustrative" corporate tax reform plan), eliminating all business tax expenditures (e.g., domestic manufacturing deduction, LIFO, general business credits) and adopting a territorial tax system (the taxation of passive foreign-source income would not change).
· Additional proposals included: instituting a payroll tax holiday in 2011 (which is along the lines of the recent tax provision passed by Congress that gives Americans a two percent Social Security tax holiday), raising the retirement age to 68 by 2050, increasing the gasoline tax by 15 cents per gallon between 2013 and 2015, capping discretionary spending in 2012 to a level equal to or lower than levels in 2011, and returning spending to pre-crisis 2008 levels in real terms in 2013, achieving nearly $4 trillion in deficit reduction through 2020, reducing White House and congressional budgets by 15%, freezing pay for members of Congress for three years, and cutting the government work force by 10%.
The question remaining is what will happen with the Commission’s recommendations now that the group has voted the proposal down. Two of the Commission’s members, Congressman David Camp of Michigan and Senator Max Baucus of Montana, will lead the House Ways and Means Committee and Senate Finance Committee in the 112th Congress. Both Camp and Baucus voted against the final report. It has yet to be seen if any of the proposals will be considered by both Chairmen in the 112th Congress.
It should be noted, however, that the Commission came up with a plan to shrink the deficit and reduce the national debt with votes in support of the proposal from some of the most conservative and liberal lawmakers alike. At the time of its formation, the Commission was criticized; however its bipartisan outcome changed the minds of many of its initial critics. Some of the Commission’s findings will likely be a part of the President’s budget that will come out in February. President Obama will be able to release his budget with many of these proposals and point to the bipartisan nature of the recommendations. The findings of the report are sure to be on the minds of many members of Congress next year as well. With so many new members of Congress coming to Washington, especially many of those that identify as part of the Tea Party, it is uncertain how they will respond to many of the proposals in the Commission’s final report.
The recent work on the Commission shows that bipartisanship is still possible in Washington- it just takes hard work, compromise, and humility to achieve it.
Upcoming Events/Roundtable News:
The next Private Company Roundtable call is scheduled for January 12, 2011 at 2:00pm eastern. We are currently working on a robust agenda and look forward to a lively discussion. To register for the call, please click here.
FEI is seeking interested Roundtable members who might be interested in serving on the Leadership Advisory Council, a body that will support the Co-Chairs in furthering member recruitment and the planning of future calls and programming. If you are interested, please contact Tyler Roberts, Policy Analyst, at email@example.com or 202.626.7807.
FEI is currently in the process of developing a private company webcast series. We are finalizing a date and time in mid-February to unveil this programming. Please stay tuned for further information.
Please mark your calendars for April’s Roundtable teleconference.
· Wednesday, April 20, 2011 at 2:00pm eastern time.