October Policy Watch: Taxes, Budget & More

WIPP Government Affairs

GOP Releases Tax Reform Proposal: What’s in it for you?

Congress has finally taken the long-awaited steps toward implementing tax reform. GOP leaders released their framework for tax reform in a proposal entitled, “Unified Framework for Fixing Our Broken Tax Code.” Provisions pertinent for small business in the plan include:

  • Limits the maximum rate applied to pass-through entities to 25% (currently 39.6%)
  • Reduces the corporate rate to 20% (currently 35%)
  • Consolidates the seven individual tax brackets to three: 12%, 25%, and 35%
  • Allows room for Congress to add a fourth bracket for high income earners
  • Repeals the Estate Tax
  • Repeals the Alternative Minimum Tax (AMT)
  • Eliminates taxes on the first $24,000 of income earned by a married couple and the first $12,000 of income earned by a single individual (currently $12,700 for married filers and $6,350 for single filers)
  • Eliminates the standard deduction and personal exemption for filers
  • Allows businesses to expense the cost of new investments in depreciable assets for five years
  • Partially limits the deduction for net interest expense incurred by C corporations
  • Eliminates some itemized deductions (but does not specify which provisions)
  • Eliminates § 199 manufacturing deduction
  • Retains tax benefits for retirement security (401K, IRA)
  • Implements territorial tax system

House Ways and Means Committee Chair Kevin Brady (R-TX) attended the WIPP Annual Leadership Meeting Luncheon to talk about the plan and to answer questions from members.

Finalizing the Budget: Why Does It Matter?

If both the House and the Senate do not pass an FY2018 Budget, the GOP tax reform framework cannot pass in its current form. Congress hopes to pass tax reform though reconciliation, a process that allows the Senate to pass budget-related legislation with a simple 51 majority vote, instead of the 60 votes typically required. The GOP has a 52-48 majority in the Senate. If the budget resolutions do not pass, the tax reform package negotiated by the Administration and GOP Congressional leaders would require at least eight Democratic votes.

Last week, the House passed their FY2018 Budget Resolution, H. Con. Res. 71, which contains reconciliation language that directs the House Ways and Means Committee to begin drafting tax reform legislation. The House resolution provides $300 billion over 10 years to pay for tax reform. The Senate Budget Committee also passed their FY2018 Budget Resolution.  The Senate resolution contains reconciliation language that provides the Senate Finance Committee with $1.5 trillion over 10 years for tax reform.

The bill will be taken up by the Senate when they return from recess next week.

SBA Issues Notice of WOSB NAICS Changes

SBA is responsible for implementing and administering the Woman-Owned Small Business (WOSB) Program. The WOSB Program authorizes federal contracting officers to restrict competition for an acquisition to WOSBs, provided that appropriate conditions are met. In order to identify the industries eligible for set-asides under the WOSB Program, the SBA administrator has to conduct a study every five years to identify which industries WOSBs are underrepresented in in the Federal marketplace. As a result of the 2014 study findings, SBA increased the number of NAICS codes authorized for use under the WOSB Program to 113 four-digit NAICS industry groups, effective March 3, 2016. Consequently, WOSBs have been able to compete for and receive contract awards in 92 four-digit NAICS industry groups or 365 six-digit NAICS codes. EDWOSBs have been able to compete for and receive contract awards in 21 designated four-digit NAICS industry groups or 80 six-digit NAICS codes, in addition to those authorized for WOSBs.

On August 8, 2016, OMB published its most recent update to the NAICS industry groups, NAICS 2017, “Notice of NAICS 2017 final decisions.” These went into effect on January 1, 2017. In order to align the WOSB Program with the Notice of NAICS 2017 final decisions and SBA’s adoption of NAICS 2017 for its size standards, SBA is issuing this notice to amend the NAICS codes eligible for use under the WOSB Program.

Changes to WOSB NAICS

  1. 2012 NAICS codes 333911 and 333913 à 2017 NAICS code 333914 [Due to merges from the four digit codes]
  • 333911: Pump and Pumping Equipment Manufacturing à 333914 Measuring, Dispensing, and Other Pumping Equipment Manufacturing
    • Measuring and Dispensing Pump à Measuring, Dispensing, and Other
  • 333913: Manufacturing à 333914 Pumping Equipment Manufacturing
  1. 2012 NAICS codes 512210 and 512220 à 2017 NAICS code 512250 [Merged Industries]
  • 512210 Record Production à 512250 Record Production and Distribution
  • 512220 Integrated Record Production/Distribution à 512250 Record Production and Distribution
  1. 2012 NAICS code 517110 à 2017 NAICS code 517311
  • 517110 Wired Telecommunications Carriers à 517311 Wired Telecommunications Carriers
  1. 2012 NAICS code 517210 à 2017 NAICS code 517312 [Changed without changing definitions or titles]
  • 517210 Wired Telecommunications Carriers (Except Satellite) à 517312 Wired Telecommunications Carriers (Except Satellite)
  1. 2012 NAICS code 541711 will correspond to 2017 NAICS codes 541713 and 541714 [New industries were created by splitting two industries into two parts with one part of each industry defined as a separate industry and combining other parts of the two industries to form a separate new industry]
  • 541711 Research and Development in Biotechnology will correspond to 541713 Research and Development in Nanotechnology and 541714 Research and Development in Biotechnology (except Nanotechnology)
  1. 2012 NAICS code 541712 will correspond to 2017 NAICS codes 541713 and 541715
  • Research and Development in the Physical, Engineering, and Life Sciences (except Biotechnology) will correspond to 541713 Research and Development in Nanotechnology and 541715 Research and Development in the Physical, Engineering, and Life Sciences (except Nanotechnology and Biotechnology)

Senate Small Business Committee Highlights Tax Burdens on Small Businesses

Last week, the Senate Small Business and Entrepreneurship Committee took up one of the most important issues for Congress this year—tax reform. The committee held a hearing on tax reform to address the code’s current barriers to small business growth. Witnesses testifying before the Committee included Mark Mazur, director of Urban-Brookings Tax Policy Center, Annette Nellen, chair of the American Institute of Certified Public Accountants (AICPA), and Brian Reardon, president of S Corporation Association.

Both the majority and minority voiced the importance of the small business voice when considering tax reform. Chair James Risch (R-ID) began the hearing by pointing to a grim fact: tax compliance costs are 67% higher for small businesses. Due to these extraordinary costs, roughly 89% of small business owners have to rely on outside assistance to comply with the tax code. As we all know, time is money. Ranking Member Jeanne Shaheen (D-NH) commented on the length and complexity of the tax code, pointing out that small businesses spend 2.5 billion hours complying with IRS rules. These hours are valuable time wasted on compliance that could be used for growing a business.

Too Much Time and Too Much Money

Questions from members of the committee centered around the increased burdens and costs of tax compliance that small businesses experience. Annettee Nellen from AICPA highlighted in her testimony that tax relief should apply to all businesses, not just C-corps. This is at the core of WIPP’s policy recommendations: to reform the tax code to make deductions and credits equitable, no matter the structure of the company. Mark Mazur, director of the Urban-Brookings Tax Policy Center, added that the current tax system is “woefully” out of date as it applies to business income. In changing the tax code, Congress will have to look at how different the economy is today from the last time the code was revised, he advised. As pointed out in WIPP’s 2017 Economic Blueprint, pass through entities are subject to a top individual tax rate of 43.4%, and with state and local tax rates ranging up to 13.3%, this significantly hampers business growth.

Institutional Barriers for Women

Ranking Member Shaheen referenced research conducted by WIPP and American University’s Kogod Tax Policy Center. “The last time the tax code was updated, there were only four million women-owned small businesses,” said Shaheen. “Today, there are 11.3 million, making up 38% of firms in this country.” She noted that Congress does not have enough information on women-owned businesses citing the Kogod study, Billion Dollar Blind Spot, asking the panel how Congress and the administration can improve the tax code for women business owners. Mazur agreed, noting that additional resources should be allocated by the IRS to determine barriers for women-owned businesses.

There is certainly agreement from both sides of the aisle that it is time for a change when it comes to tax reform and that the concerns of small businesses should be taken into consideration. This was the first of many conversations that will take place on this critical issue.

To read the written testimony from the hearing, click here.

To read the WIPP and Kogod tax study, click here.

To read WIPP’s 2017 Economic blueprint, click here.

Writing YOUR Success Story

By Linda McMahon, SBA Administrator

Once upon a time….

It’s the classic opening to our favorite fairy tales. As children we dream of magic potions and knights in shining armor that will provide our happily ever after. How were we to know thalinda-mcmahon-high.jpgt our own hard work, skill and determination could be far more effective?

Once upon a time, my husband and I started our business sharing a desk. As he developed our product and expanded our markets, I managed the books. When the work became too much for the two of us to handle ourselves, we hired our first employee. As our business grew, we hired another. Then another. Over decades of hard work growing our business, that company we created now has grown to a publicly traded enterprise with more than 800 employees and consumers in 180 countries worldwide.

As an entrepreneur, I have truly lived the American Dream: the classic tale of taking a risk on an idea, working hard and creating something from nothing. Don’t get me wrong – we had plenty of stumbles and challenges that provided the plot twists along the way. But it’s a story I am always proud to tell.

And as head of the U.S. Small Business Administration, my goal now is to help more people have the opportunity to live the American Dream.

Yet many aspiring entrepreneurs have no idea how to get their stories started or write their next chapters.

The SBA is here to help, with resources both online and in communities from coast to coast.

During National Small Business Week, as we celebrate the 28 million small businesses that drive our nation’s economy, we also showcase the resources and services the SBA provides to entrepreneurs at every stage, whether they are starting up, expanding or getting through a tough time.

The SBA has 68 district offices and an extensive network of resource partners across America, including Puerto Rico, the U.S. Virgin Islands, and Guam. The experienced professionals that staff these offices offer a core group of services that we call the “three Cs and a D” – capital accesscounselingcontracts, and disaster assistance.

Many entrepreneurs need capital to start or expand their small business, combining what they have with other sources of financing. While the SBA doesn’t loan money directly to small business owners, it helps facilitate loans with a guaranty that a certain portion will be repaid. We offer counseling on starting, scaling and succeeding in business, from how to draft a business plan to how to export your product overseas. And we train small businesses on how to compete for government contracts, especially those set aside exclusively for small business owners. Finally, SBA provides a helping hand to small businesses recovering from disasters.

As I think back on my own story as a small business owner, I wonder how much easier things might have been if we’d been aware of the many valuable services SBA provides. My hope is that as more people learn about the SBA, they will have the confidence, skills and resources they need to succeed as small business owners, and we can continue to revitalize a spirit of entrepreneurship in our country.

There’s room for far more success stories in our library.

And the SBA can help more entrepreneurs write their own “happily ever after.”

Linda McMahon serves as the 25th Administrator of the U.S. Small Business Administration.

 

 

 

Washington has many great traditions but this one must go

By Ann Sullivan, WIPP Chief Advocate

If you keep a close eye on Washington from year to year, you’ll notice some traditions that always take place. The annual White House Easter Egg Roll in the spring, when children gather to race eggs with wooden spoons down the South Lawn. The Congressional baseball game in the summer, when House Republicans face off against House Democrats at the Nationals park to raise money for charity.

And, of course, the talk of a looming government shutdown any time the previous funding mechanism is about to run out—a tradition that affects so much more than the District of Columbia.

We’ve heard it before and we’ll hear it again—If Congress doesn’t find a way to fund the government, it will shut down. In true fashion, with the deadline to pass a bill set for last Friday, April 28, Congress gave itself a little more time by passing a week long Continuing Resolution—until May 5, without altering the terms or conditions that apply to funding.

And then—a welcome break in tradition. Congressional negotiators in a bipartisan fashion, finalized a $1.1 trillion spending bill, keeping the government funded through September.

While a government shutdown rarely actually happens—when it does—it is not good for women business owners. In fact, it isn’t good for anyone. When federal contractors can’t get paid, they can’t pay the people who work for them. When they can’t pay the people who work for them, they can’t produce any work. The contractor suffers, the jobs she’s created suffer, and the economy suffers.

However, some contractors don’t have the option of laying off their employees during a shutdown. WIPP Board Chair Lisa Firestone struggled with this firsthand. In 2013, Lisa testified before Congress about the negative impact that year’s shutdown had on her business, as well as other women federal contractors. Because her company provides “essential” services, her employees continued to work and get paid during the duration of the government shutdown that year. Despite knowing she eventually would get paid from the government, there was no way to know when. She’s not the only one.

Many small business owners face this same problem and face the stress of preparing to maximize available cash in advance of a potential shut down. Between the options of a shutdown and a Continuing Resolution, a Continuing Resolution is the lesser of two evils. But, it may not be so great for women contractors either.

Continuing resolutions curb new government spending and, thus, new government projects. We know firsthand from our members that operating under a Continuing Resolution results in project delays as well. Since many agencies can’t open expired contracts for new bids, they often turn to uncompetitive bridge contracts with existing vendors to keep services moving. The problem is, according to the Department of Commerce, women-owned firms are 21% less likely than their male-owned counterparts to win government contracts. Given this significant barrier to entry, access to contracts is further exacerbated by this method of procuring goods and services.

The impact of a shutdown is harsh on contractors. If the government is your customer, the consequences are immediate. The Department of Homeland Security in the 2013 shutdown issued a warning to its contractors: “…as a consequence of the lapse, certain planned procurements may be canceled and certain existing contracts may be stopped, reduced in scope, terminated or partially terminated.” Not to mention, the chaos created with respect to lending. Since lenders rely on the IRS to verify income, lending was stopped dead in its tracks.

Let’s get rid of this tradition. Successful businesses plan ahead and so should Congress. The wide-reaching consequences spurred by Congressional inaction of a timely budget are significant. Contracts that aren’t funded by prior appropriations and aren’t essential probably will be put on hold during a shutdown – while contractors that are essential will have to continue to work, but while having to bear the cost of their employees’ salaries. The business community should be spending all of its capital expanding, not saving up for a possible government shutdown. Despite the good news for the remainder of Fiscal Year 2017, the fight has just begun for Fiscal Year 2018. It’s time for Congress to put together a plan to fund the government without worry of a shutdown or relying on Continuing Resolutions again and again so entrepreneurs can worry about what matters – running their business.

SBA Administrator McMahon makes first appearance before a Congressional committee

By Jennifer White, WIPP Government Relations

Small Business Administration Administrator Linda McMahon talked about her plans for the agency during her first official hearing with the House Small Business Committee on April 5. From the start, Administrator McMahon made clear that her goal is to raise the profile of the agency, in hopes of renewing the spirit of entrepreneurship in America.

“Becoming administrator has been a lot like assuming the position of CEO – trying to evaluate employees and practices and figuring out what’s working and what’s not. My first town hall address was to let folks know that I want this to be the best SBA that’s ever been,” said McMahon.

Throughout the hearing, committee members showed interest in working with the administrator and addressed hard-hitting topics for WIPP – including access to capital, healthcare, tax reform, and regulations. Below are highlights:

  • Access to capital
    • In response to inquiries on improving access to capital for women, McMahon said one of her main focuses would be to ensure that more women apply for loans. McMahon plans on providing counseling to women entrepreneurs creating a business plan. She also said she believes SBA can work to increase the number of women in lending positions when asked about the lack of Small Business Investment Company (SBIC) investments to women-owned firms. SBICs are licensed by the SBA to supply small businesses with both equity and debt financing. Increasing women in lending positions is a point highlighted in the WIPP Economic Blueprint.
  • Healthcare
    • The administrator supports the creation of association plans across state lines offered to small businesses, which WIPP supports. McMahon, referring to HR 1101, which recently passed the House, believes this change to the healthcare market would reduce premiums for small business owners.
  • Tax reform
    • Administrator McMahon wants small businesses to receive similar tax treatment as large businesses, another position WIPP outlines in its Economic Blueprint.
  • Regulations
    • The administrator supports reforming regulations to reduce the burden and costs placed on small businesses. She believes the first step is to look at what regulations are really necessary and go from there. WIPP cites the need for reliable policies and regulations in the Economic Blueprint, as well.

Only two months into her position, the administrator is in the early stages of making the progress she wants to. But, between her enthusiasm for the positions outlined here and the committee’s readiness to work with the administration, it is certain there will be lots to watch for in the coming year.

To watch the full hearing and read Administrator McMahon’s written testimony, click here.

The confusion surrounding the federal budget debate

By Ann Sullivan, WIPP Chief Advocate

Recently, WIPP’s President Jane Campbell and I gave a webinar on the federal budget process, which attempted to explain all of the moving parts in the federal budget, including what it means to businesses and the organizations they support. Below I have laid out the steps in the process as simply as possible.

Immediate action item

  1. The funding for Fiscal Year (FY)17 ends on April 28, 2017, therefore Congress must act on or before that date to keep funding the government for the remainder of FY17, which ends on September 30, 2017. FY17 has been funded through a Continuing Resolution (CR), meaning that FY17 has been funded at FY16 levels. While under a CR, federal agencies cannot award grants or initiate new program starts.

Funding options for FY17

(a) A Continuing Resolution until the Fiscal Year ends, or

(b) An “omnibus” appropriations bill to fund the rest of the year. Omnibus simply means putting the 10 remaining agency appropriations into one big bill. The Defense Department and the Veterans Affairs Department bill were signed into law, so there are 10 agencies remaining.

The president can request supplemental appropriations in the current fiscal year, which is exactly what President Trump did in March. He requested $30 billion more for FY17 funding for defense and homeland security. Congress will decide whether or not to honor his request, which would be rolled into the FY17 Omnibus bill.

Longer-term action items

  1. Funding for FY18—which starts October 1, 2017. The House Appropriations Committee is responsible for starting the funding process, and revenue bills must start in the House. The committee is just now starting hearings on funding programs, and subcommittees of this committee have responsibility for certain federal agencies. For example, the Treasury and SBA are funded by the Financial Services and General Government Subcommittee. The three-part process is as follows: Subcommittees act first, the full Appropriations Committee considers, and then the bills go to the House floor for action.
  2. Raising the debt ceiling will be required sometime this fall. Why does that matter? If it is not raised, the federal government defaults on its debt, which would send ripples through the global economy.
  3. The FY18 Budget Resolution provides a high-level set of budget numbers that appropriators work against. Much like your own budget, the federal budget is anticipated spending, not what is actually spent (appropriations). Ideally, the Congress should agree on a resolution before it does appropriations, but that does not seem likely.

The interplay between the president’s proposed budget for FY18 (yes, there will be two: 1) a blueprint released in March and 2) a more detailed budget in May) and appropriations is worth an explanation. What we all learned in civics class, “the president proposes and the Congress appropriates,” sets the tone. The media frequently forgets to include this fact in their coverage of the budget, suggesting that the president has the sole power to determine the budget. In fact, he does not. He can only use his bully pulpit to ask for funding priorities. Generally speaking, the Congress, especially if it is from the same party as the president, tries to accommodate his requests. Side noteI say “he” because there has never been a “she.”

In his proposed budget, President Trump suggested cutting many programs that have powerful constituencies, causing widespread alarm among recipients of these programs. While this is certainly a wake-up call for many, the real alarm bells should be directed at the appropriators.

Which leads me to WIPP’s strategy with respect to FY18 funding of programs that support women entrepreneurs. We have concentrated on the appropriators and will continue to urge support. Members on the House Appropriations Subcommittees are the first line of defense and later, the full Appropriations Committee. After finishing with the House, we will turn our attention to the Senate Appropriations Committee. The last stop is floor action.

All told, the season to advocate on behalf of appropriations started in March, and will continue through the rest of the year. The Congress will continue to engage constituents with respect to budget decisions. On April 7, Congress will begin a two-week recess. Legislators will be in their home districts and conducting meetings. Echoing WIPP’s funding requests would be much appreciated. If you are a government contractor, consider voicing the need for stability in the federal budget.  If you support local nonprofit organizations, take a look at federal support dollars and speak up.

The time is now.

Rock, Paper, Sciss… Paper, Paper, Paper

By Jennifer White, WIPP Government Relations

The House Small Business Committee wants to know: are burdens on small businesses from paperwork being reduced by the Paperwork Reduction Act? According to Sam Batkins, the director of regulatory policy at American Action Forum, the short answer is they are not.

The Paperwork Reduction Act (PRA) was designed to reduce the total amount of paperwork the federal government imposes on private businesses and citizens. In order to achieve this goal, it imposes procedural requirements on agencies that wish to collect information from the public. However, between the sheer volume of instructions that accompany some paperwork, and the lack of resources at various agencies, it doesn’t seem to be working.

Look, for example, at the Internal Revenue Service. According to Frank Cania, founder and president of driven HR, the IRS is responsible for more paperwork than any other agency. “Small businesses fall into a cycle of having to file new forms every time an honest mistake is made in order to avoid IRS fines,” said Mr. Cania, who testified on behalf of Society for Human Resource Management.

For perspective on how time consuming and complex some of the documents can be, he explained to the committee that while an I-9 Form is only two pages long, the instructions are 15 pages long, and the instruction manual is “a slim 69 pages long.”

According to Sally Katzen, professor at NYU Law and senior advisor at Podesta Group, another key related issue with an agency like the IRS is that lack of resources to help individuals with compliance. “Used to, you could call and get someone to answer on the third ring,” she said. “Now, given the cuts to the IRS, the waiting period is well over two hours if you bother to stay on the phone. They’ve had to give up almost all of their assistance with compliance.”

When asked by the committee what Congress can do to make it better, Ms. Katzen answered that the key is investing in resources. “Somebody has to talk to somebody if you want the system to work. You need to put in the resources to enable that to happen.”

It is important for agencies to be able to collect information because it not only aids government decision making, but is often redistributed to the public which some find critical for making business decisions. However, there has to be a way to reduce the volume of paperwork. “There is only so much agencies can do. Only Congress can change the statutory requirements,” Ms. Katzen concluded.

To see the written testimony and witness list from the hearing, click here.

March Madness: A Policy Version—The Elite Eight

By Ann Sullivan, WIPP Chief Advocate

For many years, my son Matt and I watched March Madness together (that was until he moved to Los Angeles). Not only are many of the games squeakers, I love the upsets and Cinderella teams that emerge during the tournament. Half of the fun is filling out the brackets and guessing which teams will move forward.

So, in honor of March madness, we bring you March policy madness. We have created a policy bracket of the issues we expect will make it past the first round of Congressional action. Just for fun.

WIPP Works Bracket March 2017.png 

Here’s an explanation of the Policy Brackets:

Upper Left: Healthcare vs. Border Wall

President Trump’s Executive Actions have identified both repeal of Obamacare and the potential construction of a border wall. Congressional attention is focused on repealing and or replacing the Affordable Care Act.

Healthcare wins this round.

Upper Left: Regulatory Reform vs. FY2018 Appropriations

Congress is hungry to take back policy-making power from the Executive Branch and has found a sweet spot—rolling back regulations—a move President Trump agrees with. He has already signed legislation repealing a Department of Interior rule and is expected to sign more repeals in the coming months.

On the other hand, appropriations is a long and cumbersome process. To get started, on Fiscal Year 2018 appropriations, President Trump needs to share a budget outline with Congress expected next month, and both the House and Senate Appropriations Committees will need to pass all 11 appropriations bills by the end of September. This is a process that has not occurred in over 20 years.

Regulatory reform wins this round.

Lower Left: Trade vs. Supreme Court Nominee

President Trump has indicated that reforming trade policy is a high priority.  But revamping global trade deals into bilateral negotiations will prove to be complicated. The Supreme Court vacancy, on the other hand, has been top of mind. Some Senate Democrats have privately conceded that they expect Neil Gorsuch to be confirmed, taking the place of Antonin Scalia.

The bracket goes to Supreme Court nominee Neil Gorsuch.

Lower Left: Debt Ceiling v. Government Shutdown

Toward the end of the summer, the Treasury Department will have exhausted all “extraordinary measures” to continue paying the government’s bills. Once again, Congress will need to raise the debt ceiling. This close-to-annual exercise used to be non-controversial. But not anymore. This is an opportunity for Congress to discuss fiscal policy.

Another opportunity to discuss fiscal policy is the expiration of the Continuing Resolution on April 28th. In the past, government shutdowns have been threatened/executed, putting continued funding of the government at risk. Given that both Houses of Congress and the president are from the same party, it doesn’t seem likely that shutting down the government is an option. That being said, crazier things have happened in Washington.

Due to timing, debt ceiling wins by a single foul shot.

Upper Right: Taxes vs. Immigration

Tax reform, a priority of both the president and the Congress, is long overdue. In fact, comprehensive tax reform has not been successful since 1986. But don’t look for action overnight. Congressional Republicans are suggesting it will be undertaken sometime this fall.

On the other hand, immigration is even more contentious and bipartisan reform plans were last successful in 1996 under President Clinton. Since then, although there have been many efforts, reform has been elusive.

Tax wins this round.

Upper Right: Defense Spending vs. Infrastructure

Appropriators are currently preparing a special supplemental funding bill for the Defense Department and President Trump announced he would like to add $54 billion to the defense budget. The infrastructure bill hasn’t gained as much traction as the rhetoric about its importance.

Defense spending wins this round.

Lower right: FY17 Omnibus Appropriations vs. NDAA

The National Defense Authorization Act has a 55-year history of being signed into law each year. It is considered in Congress a “must pass” bill. Omnibus appropriations that combine multiple appropriations into a single bill have a spotty record at best. While Omnibus appropriations passed in Fiscal Year 2016, it is still unclear how the rest of FY17 will be funded. Because no one is quite sure, we declare NDAA the winner.

NDAA wins this round.

Lower right: Spending Cuts vs. Elimination of a Federal Agency

President Trump made a campaign promise to significantly decrease agency spending and is expected to propose major cuts in the FY2018 budget. Although eliminating agencies is possible, it is easier to starve an agency than eliminate it altogether.

Spending cuts win this round.

The Elite Eight issues that we predict will prevail to the next round in Washington are:

  • Regulatory Reform
  • Healthcare
  • Supreme Court Appointment
  • Debt Ceiling
  • Tax
  • Defense spending
  • NDAA
  • Spending Cuts

In Washington policy circles, representing women-owned businesses is often like rooting for the underdog. Women across the country who have joined our voice often end up winning the policy fight even though they are dismissed in the “first round.” But collectively, we can end up being the winners who bring home the victory. Not just for us, but for those who have come before us and those that are coming behind us.

Which issues do you think will score over the coming month? Tweet at us @WIPPWeDecide #DCelite8 with your predictions for the Final Policy Four.

Executive Order Bonanza has Implications for Business

By Ann Sullivan, WIPP Chief Advocate

President Trump will complete only his third full week on Friday and has already left a lasting mark on how small businesses and government itself work with 20 Executive Orders. Through a series of presidential actions, Mr. Trump has touched on topics ranging from Immigration to healthcare. It’s time we took a deeper dive into what’s come down the pipeline and how it affects the small business community. Read the blog here.

The domestic policy action that was signed in the presence of a number of small businesses, is the “Two-for-One” Executive Order.

Here’s the rundown. The Executive Order has two parts – one aimed at Fiscal Year 2017 and one for Fiscal Year 2018:

  • FY17: “1 in and 2 out.” If a federal agency proposes a new regulation, it must recommend two regulations to the Office of Management and Budget (OMB) to be terminated. OMB, not the agency will have the final word on which regulations are eliminated.
  • FY18 and subsequent fiscal years: Agencies are ordered to offset costs of new regulations and the OMB is ordered to create a budget that limits how much a new regulation can rise.

On its face, this Executive Order spells relief for lenders and small businesses but there are a raft of unknowns still to be resolved. One question is when this directive will be implemented. For example, the administration’s OMB Director-designate Congressman Mick Mulvaney is undergoing a tough confirmation process and the timeline for his confirmation by the full Senate is still unclear.

Executive Orders generally provide broad guidelines rather than detailed plans on its execution. Questions to be answered are: What actually constitutes a “regulation?” Is it simply a single rule or a whole host of interwoven regulations that, together, provide guidance for an agency on an individual program or policy? What constitutes a “cost?” Will the benefit in a cost-benefit analysis be considered or will the analysis include only the cost? OMB is stocked with experts so we anticipate much more clarity on this as soon as the OMB director is confirmed.

Now, on to more straightforward presidential actions regarding President Trump’s infrastructure plans. One such action expedites environmental review and approval for high priority infrastructure projects and gives any Cabinet member or governor the unilateral ability to designate a project as “high priority” thus shortening the approval process, laid out in the NEPA law. He’s also issued a “Build the Wall” action which orders the Department of Homeland Security to begin building a wall along the U.S. and Mexico border using existing funds. It also authorizes the hiring of 5,000 new border agents. Congress will have to appropriate additional funds for completion because the current budget does not have funding for this project.

Additionally, there were two more Executive Orders issued almost immediately upon President Trump’s inauguration. One of the first actions signed by President Trump was an Executive Order that begins the process of repealing Obamacare. While it does not directly repeal the law, it directs federal agencies to give states, insurance companies and consumers maximum flexibility in complying with Obamacare until such a time as it is repealed. Full repeal and/or replace is going to take an act of Congress which has been openly wrangling with itself on whether to repeal, repeal and replace, or to “repair” the existing law. Regardless, this presidential action starts the ball rolling with respect to repeal of Obamacare while Congress considers its course of action.

The other significant action taken by the president instituted a federal agency-wide hiring freeze on all existing and open positions with exceptions for national security, military, and public safety.  The president intends this as a stopgap and allows agencies to reallocate to prevent public safety and national security from being adversely affected. The kicker, however, is that the memorandum explicitly prevents the hiring of outside contractors to prevent the circumvention of the spirit of the order. Given the number of waivers and exceptions allowed, it’s not altogether clear how this will work in practice, but it certainly lays down a marker that the president is serious about reining in the growth of the federal government.

Finally, on Feb. 3, the president signed two Executive Orders aimed at decreasing regulations for the financial industry; the first calling for a review and the scaling back of existing financial laws, including Dodd-Frank, and the second halting the implementation of the Department of Labor’s (DOL) fiduciary rule, which was set to go into effect this April.

Dodd-Frank, enacted after the 2008 meltdown, was responsible for creating more stringent rules regarding bank capitalization, increasing compliance and reporting standards for banks, introducing stricter mortgage requirements, creating the Financial Stability Oversight Council and the Consumer Financial Protection Bureau, and curbing excessive risk-taking and the existence of too-big-to-fail institutions on Wall Street. Mr. Trump’s action on Dodd-Frank requires regulators to produce a study on financial rules within 120 days—appearing as more of a demand for a review than a complete dismantling of the law.

The fiduciary rule was intended to prevent consumers from receiving conflicted advice when it comes to retirement savings. The president’s order calls for the DOL to examine the rule to determine whether it may lead to the unintended consequence of making it more difficult for advisors to provide financial advice to their clients. However, embraced by much of the financial industry, this order is expected to move quickly compared to the order on Dodd-Frank.

These Executive Actions have the potential to clear the way for even greater gains by women-owned small business moving forward. As we reach for new heights in 2017, WIPP will be fully engaged with the Congress and administration to ensure that burdensome regulations harming the growth of women-owned small business are eliminated and we continue to be the robust engine powering the small business economy.

Reimagining Health Care

By Ann Sullivan, WIPP Chief Advocate

Affordability, predictability, and flexibility were three themes reiterated at the Feb. 7 hearing held by the House Committee on Small Business entitled “Reimagining the Health Care Marketplace for America’s Small Business.” It was held for the purpose of taking a look at the current marketplace and its recent difficulties, and to explore options to improve access, affordability, and consistency.

While no clear legislative path has yet been paved, many facts, figures, and ideas were floated around regarding how to ensure that small business is not an afterthought in the revamping of the healthcare system. Solutions presented and discussed at the hearing included tax credits for small business, across state line coverage, and Health Savings Accounts and Health Reimbursement Arrangements.

Here is more about the items discussed.

  • Tax credits for the self-employed: As the Tax Code currently stands, self-employed individuals are restricted from deducting their health insurance premiums. Small, self-employed business owners end up paying more for health insurance because their premiums are not treated the same for taxes as other businesses.

Leveling the playing field by giving these small businesses tax credits would improve affordability for small business owners, as well as expand the pool of coverage, according to Keith Hall of the National Association of the Self-Employed (NASE).

  • Across state line coverage: The number of insurers participating in the marketplace varies widely from state to state, as do the number of coverage plans. The lack of competition among insurers in the current exchanges decreases pressure to keep costs down.

Mr. Hall of the NASE believes that allowing for the sale of health insurance across state lines will boost competition, driving costs down. In order for this to happen, Congress will have to enact a health plan that will modify the existing law that inhibits the sale of health insurance across state lines.

  • Health Savings Accounts (HSAs) and Health Reimbursement Arrangements (HRAs): A provision of a law signed into Congress last session allows small employers with fewer than 50 full-time employees that do not offer a group health plan to fund employee HRAs to pay for qualified out-of-pocket medical expenses and for non-group plan health insurance premiums, including plans purchased on the public health care exchanges.

Allowing small businesses to offer a bare bones plan and HSAs would allow individuals to decide the best choice for themselves and their families, according to Tom Secor of Durable Corporation, who testified on behalf of the National Small Business Association (NSBA).

This hearing was the first of a continuing series that will take place on the discussion of healthcare repeal and replacement. To read full written testimony from each witness here.