Friday, May 8, 2009

News from Ranking Member Sam Graves and Committee Republicans:
• Rep. Buchanan in Bradenton Herald, “Local CPA talks tax code in D.C.”
• Rep. Erik Paulsen (R-MN) gave a “Small Business Floor Speech” this week

Must-Reads from the Week:
• Los Angeles Times: “Business leaders sharply critical of Obama's plan to crack down on overseas tax shelters”
• Los Angeles Times: “Kill the death tax”

Administration and the SBA:
• On Thursday, the Obama Administration finally released its detailed FY10 Budget report.  According to White House officials, the proposals will eliminate 121 programs saving $17 billion in FY10.  President Obama’s budget is over $4 trillion dollars with a deficit projected by the Congressional Budget Office to be $1.8 trillion in fiscal year 2009.  According to Ranking Member Paul Ryan of the House Budget Committee, “While it’s encouraging that the President has put forward specific proposals to reform and terminate programs, these savings need to be put in the context of the President’s overall budget.  It is important to note that these proposed savings – even if all of them were enacted – would NOT reduce the President’s spending totals: the $17 billion in proposed savings has already been incorporated into the Administration’s budget numbers.”

Review of House Activity:
• On Thursday the House passed H.R. 1728, the Mortgage Reform and Anti-Predatory Lending Act, by a vote of 300-114.  The aim of this legislation is to address past problems in the housing market by establishing new standards for mortgage origination and imposing greater legal liability on the secondary mortgage market.  Concerns have been raised over constricting the ability of the secondary market to fund suitable loan products for credit-worthy borrowers, increasing the cost of mortgage credit overall, exposing to liability a broader cross-section of mortgage products, and potentially giving taxpayer dollars to organizations like ACORN.  Several ACORN employees have recently been indicted and convicted of federal election fraud.  

 Legislation and Letters Circulating Around the House:
(If you would like to publicize your small business effort in Congress, please email Paul J. Sass at Paul.Sass@mail.house.gov)

• Rep. Bilbray Seeks Co-signers for a Letter to the Administration Supporting the Panama Free Trade Agreement- Rep. Bilbray wanted to draw your attention to the attached letter of support for the Panama Free Trade Agreement.  This letter to the President simply asks him to articulate his support for the agreement and work with Congress to get this passed and signed into law.  The Panama Free Trade Agreement (FTA) would allow 88 percent of U.S. exports to enter Panama duty free upon implementation.  Within 17 years of approval, 100 percent of Panamanian tariffs would be eliminated, to the mutual benefit of U.S. and Panamanian firms and workers.  Additionally, approval of this agreement will give United States’ companies an inside track to participating in the $5 billion Panama Canal expansion project.  The expansion of the canal is one of the largest public infrastructure improvements in the world and U.S. engineering, technology, and finance firms would be strong competitors to take on much of the work, while also sharing in long-term potential benefits. If you would like to sign on to the letter to the President or if you have any additional questions, please contact Robert Boland at Robert.Boland@mail.house.gov.

• Rep. McClintock Seeks Original Cosponsors for the RAISE Act-Today, millions of hard-working Americans are subject to a de facto “pay cap” in the workplace which limits their ability to earn raises or bonuses.  That’s because in a unionized workforce, the terms and conditions of pay are dictated by the terms of a collective bargaining agreement, which often prevent an employer from rewarding a high-achieving employee.  Congressman McClintock will soon introduce the “Rewarding Achievement and Incentivizing Successful Employees” or “RAISE” Act.  The RAISE Act would simply allow employers to reward high-achieving employees through raises, bonuses, or other compensation, notwithstanding any limitation in a collective bargaining agreement or otherwise under federal labor law.  If you would like to be added as an original cosponsor of the RAISE Act, please contact Kristen Glenn at 5-2511 or kristen.glenn@mail.house.gov.

Review of Senate Activity:
• This week the Senate passed S. 896, the Helping Families Save Their Homes Act.  This legislation is intended to revive the little-used Hope for Homeowners FHA refinance program by providing incentive payments to loan servicers and originators.  S. 896 would also create a legal "safe harbor" for loan servicers who modify loans, protecting them from lawsuits by investors in mortgage-backed securities.  Loan refinancing and modifications are at the heart of the Obama administration's "Making Home Affordable" plan, which seeks to help distressed homeowners avoid foreclosure.
• On Thursday, the Senate passed S.454 the “Weapon Systems Acquisition Reform Act of 2009.”  Senator John McCain, the Chief Republican Sponsor of the bill said, “the legislation will improve the ability of the Department of Defense (DOD) to supply our servicemen and women with the best equipment to defend our nation at the best price for the American taxpayer.”   The legislation made significant changes to the DOD major acquisitions programs to primarily lower cost to the tax payer, save time, and add transparency to the procurement process.    

House Small Business Committee hearing summary this week:
• The Committee on Small Business held a hearing on May 4, 2009 entitled, “Legislation to Reauthorize and Modernize SBA’s Entrepreneurial Development Programs.”  This hearing examined the state of entrepreneurial development programs at the SBA. Recently introduced legislation, the “Job Creation through Entrepreneurship Act of 2009,” was also discussed at the hearing. Five witnesses contributed testimony, including representatives from the US Women’s Chamber of Commerce, the National Small Business Association, the Association for Enterprise Opportunity, Veterans of Foreign Wars, and SCORE.

The Office of Entrepreneurial Development (OED) at the Small Business Administration assists entrepreneurs with practical and technical skills needed to start and help grow their businesses.  The office carries out this mission through a network of educational resource partners including Small Business Development Centers (SBDC’s), Women’s Business Center’s (WBCs), the Service Core of Retired Executives (SCORE), and the Small Business Training Network.  In addition to the programs under the oversight of OED are programs run by the office of Native American Affairs and the office of Veterans Business Development.  Both offices also work to bolster entrepreneurship in the Native American and veterans communities.

The Job Creation through Entrepreneurship Act of 2009 modernizes programs administered through the OED by creating an oversight function that streamlines efforts and works to limit duplication.  The bill also introduces new programs aimed at stabilizing and strengthening small businesses in the economic downturn. It was widely agreed by the witnesses that the changes to the OED programs in the legislation were needed and will be effective.

• On May 7, 2009, the Subcommittee on Finance and Tax of the House Committee on Small Business held a hearing entitled, “How the Complexity of the Tax Code Hinders Small Businesses.”  Testimony was presented by Eric Blackledge, owner of Blackledge Furniture in Corvallis, Oregon; Christine Chin-Ryan, owner of Synergy Consulting in Portland, Oregon; Keith Hall, National Tax Advisor, National Association for the Self Employed, in Grapevine, Texas; and Stam Stathis, CPA with CPA Associates in Bradenton, Florida. 

According to the IRS’ National Taxpayer Advocate, tax issues are the single most significant set of regulatory burdens for most small businesses.  Entrepreneurs struggle to decipher the code, and a 2007 study by the Small Business Administration’s Office of Advocacy found that small firms pay 67% more to comply with the tax code than large firms do. Tax complexity is certainly a factor.

The hearing explored the complexity of the current tax code, including the fact that the tax code is over 67,000 pages, and four times as long as War and Peace.  There are reportedly 1,638 tax forms, and the IRS estimates that it takes over 37 hours to complete the basic 1040 short form.  The National Taxpayer Advocate mentioned in her recent annual report to Congress of serious problems facing taxpayers that complexity of the tax code is at the top of her list. Since 2001, there have been more than 3,250 changes to the tax code, an average of more than one a day, and more than 500 changes last year alone. These additions and changes result in confusion and difficulty with compliance, especially for small business owners, who usually lack the resources to pay for costly accountants and lawyers.

The hearing’s witnesses testified that the tax code’s length and complexity make it difficult for small business owners to understand.  Moreover, Congress’ yearly (rather than long term) reauthorization of tax provisions creates uncertainty, and prevents businesses from planning.  The witnesses agreed that replacement or a broad overhaul of the code is not imminent, and recommended simplifying the home office deduction (possibly offering the choice of a standard deduction or itemizing), and clarification of worker status (employee versus independent contractor).  Ranking Member Buchanan asked the panel if tax code complexity is a factor in running their small business. The witnesses said they believe small firms may not hire new employees because of the tax implications, and said that would inhibit economic expansion.   

Other Small Business off the Hill:
• The Coalition for Affordable American Energy released a study highlighting the costs of President Obama’s “cap and trade” legislation.

Looking Forward:
House Small Business Committee hearings next week:
• Full Committee Hearing, May 13, 2009, 10:00AM entitled, “The Role of Small Business Suppliers and Manufacturers in the Domestic Auto Industry,”  2360 Rayburn House Office Building
• Subcommittee on Investigations and Oversight Hearing, May 14, 2009, 10:00AM, entitled, “The Consumer Product Safety Improvement Act and Small Business,”  2360 Rayburn House Office Building