Letter to the full House on H.R. 598, the "American Recovery and Reinvestment Tax Act of 2009"
January 21, 2009
TO THE MEMBERS OF THE U.S. HOUSE OF REPRESENTATIVES:
The U.S. Chamber of Commerce, the world's largest business federation representing more than three million businesses and organizations of every size, sector, and region, writes to express our views on H.R. 598, the "American Recovery and Reinvestment Tax Act of 2009." While the Chamber applauds the inclusion of many provisions in H.R. 598, our overarching concern rests with the overall composition of this package. To jump start economic activity, the Chamber believes more must be done to restore liquidity, spur economic activity, and stimulate job growth.
The Chamber believes that a truly effective stimulus package must have the proper balance of tax and spending provisions to trigger near-term economic growth while underpinning long-term economic growth. The Chamber supports the tax relief provisions in H.R. 598, notably:
- An extended net operating loss (NOL) carryback period. Further, the Chamber urges including a 10 year carryback period for production tax credits for low-emissions energy technologies.
- Bonus depreciation and increased small business expensing provisions, which would promote investment and help stretch scarce capital.
- Full repeal of the 3% tax withholding on all government payments, which would provide relief to companies and governments from needlessly expending funds to prepare for implementation.
- The housing credit to first-time home buyers, which would offer a refundable tax credit equivalent to an interest-free loan equal to 10% of the purchase of a home (up to $7,500).
However, in sum, the Chamber believes that the tax provisions in H.R. 598 are simply too small to have the desired impact.
The Chamber believes many of the programs funded in H.R. 598 would help set the stage for long-term growth. The Chamber strongly supports the infrastructure spending which directly supports jobs and helps meet the demands of pressing economic, safety, energy, and environmental needs. Further, the Chamber notably supports:
- Funding for the energy efficiency and technology provisions in the Energy Policy Act of 2005 and Energy Independence and Security Act of 2007, which go a long way towards addressing global climate change and enhancing America's energy security.
- Provisions providing access to capital for small businesses.
- Funding for NASA.
- Funds to jumpstart state-based Broadband initiatives, down-payment funding for Health I.T., and funds for research, development, and demonstration to improve aviation safety and Next Generation air traffic control (NextGen).
- Education funding to improve teacher quality and for investments in science, technology, engineering, and math (STEM).
- Funding for the Manufacturing Extension Partnerships (MEP) to help small and mid-size manufacturers compete globally by providing them with access to technology.
- National Science Foundation funding at $3 billion for fundamental science research.
- Census funding to ensure accurate data is available to businesses to make investment and operational decisions, and to the government to guide policy decisions.
The Chamber believes modifying certain provisions and adding others would more effectively steer the economy to recovery. The Chamber urges streamlining the siting and permitting process for infrastructure projects to ensure construction jobs for "shovel-ready" projects are not delayed. Without streamlining, the National Environmental Policy Act, Clean Air Act, Endangered Species Act, or other laws would unnecessarily delay or block many of the roads, bridges, rails, windmills, and transmission lines funded in H.R. 598.
Further, the Chamber believes action is desperately needed to address the severe ongoing liquidity crisis. Debt as a percentage of GDP is 350%, exceeding the 250% ratio of debt to GDP during the Great Depression. Accordingly, the Chamber strongly urges Congress to provide temporary tax relief over two years for companies that purchase their own or related party debt at a discount. This would preserve jobs, facilitate the deleveraging of the U.S. economy, and strengthen financial institutions' balance sheets. Further, this would prevent further economic contraction and corporate bankruptcies, and would stem job loss while strengthening financial markets. Congress has already passed similar legislation to reduce mortgage debt and should provide the same relief for companies to preserve jobs by reducing their debt burdens. Importantly, this process would be undertaken using private capital, not public sector funds.
In addition to tax relief for debt repurchase, the Chamber believes other provisions could also ease the liquidity problems plaguing the economy. Notably, the Chamber supports:
- Temporarily allowing foreign subsidiary earnings of U.S. companies to be repatriated at a reduced tax rate would ease liquidity challenges, relieve stress on the commercial paper market, help companies meet funding requirements in employee pension plans, and generally increase available funds. This could be achieved while generating revenue for the Treasury.
- Making TARP funds available to expand access to the Commercial Paper Funding Facility (CPFF) for "Tier 2" commercial paper would ease liquidity problems, thereby thwarting unnecessary job loss and enabling companies to better meet their working capital needs.
- Making TARP funds available to capitalize a Federal Reserve liquidity facility for new commercial mortgages and unsecured commercial real estate loans to permit commercial real estate credit markets to restart and clear in an orderly fashion.
- Amending the FIRPTA rules would remove barriers that prevent foreign investors from injecting equity capital into commercial real estate, amending the REMIC rules would reduce limitations on the restructuring of commercial mortgage-backed securities, and modernizing the cancellation of indebtedness rules as applicable to REITs to facilitate loan restructuring and provide relief to the distressed real estate industry.
The Chamber believes Congress should incorporate other provisions, which would have immediate short-term benefits while simultaneously helping businesses recover in the long term, specifically:
- Expand the funding corridor and allow automatic approval of funding method election changes for pension plans, and grant broader flexibility in the election of funding methods to ensure companies survive the dramatic decline in the equities markets.
- Lease newly-available offshore oil and gas resources on the Outer Continental Shelf (OCS), which could yield as much as $1.3 trillion in new royalty income to the federal government, create more than 75,000 new jobs, and reduce the cost of H.R. 598.
- Reduce the corporate capital gains rate to 15% to encourage unlocking of appreciated assets held by companies. This would generate substantial tax revenues for the government and provide much needed capital that would be redeployed more efficiently into the economy.
- Include provisions contained in the "Travel Promotion Act of 2007" to increase travel from overseas visitors, who spend an average of $4,000 per person, per visit at America's retailers, hotels, restaurants, attractions, and many other businesses.
The Chamber also is concerned with provisions related to COBRA and Health Information Technology. Expanding COBRA eligibility and duration would impose significant administrative burden on and economic costs to employers. As with all changes to COBRA, employers would ultimately fund the programming requirements to identify and track any extensions. While the Chamber supports efforts to invest in and jumpstart Health Information Technology, this legislation must not be hampered by onerous new privacy rules that would make providers, insurers, and other health care stakeholders hesitant to implement electronic health records.
The Chamber believes the proper balance and composition of tax and spending provisions that, in the short-term, encourage investment, save jobs, reduce debt levels, and address the housing crisis, are essential. Policies that would, in the long-term, enhance stable economic growth are also vital. H.R. 598 approaches those goals, but falls short. To achieve its stated goal of economic recovery and reinvestment, H.R. 598 needs to be strengthened. The Chamber believes the recommendations made here would maximize the stimulative impacts needed and looks forward to working with Congress to achieve that necessary result.
R. Bruce Josten