NOT THIS YEAR: In the legislative poker game that often defines the work of the Senate, the latest game revolved around three issues – the death tax, the minimum wage and expired tax breaks popular with average taxpayers. With the Senate unable to pass legislation to repeal or reduce the death tax, Republican leaders came up with a new strategy in one last attempt to pass death tax reduction legislation this year. The plan – pass one bill that combines the death tax reduction and a minimum wage increase and the popular tax breaks. The strategy did not work. On August 3, in a procedural vote, the Senate failed to obtain the necessary 60-votes to beginning debating the bill. Now it’s on to the November elections, where the blame game over failing to reduce the death tax and raising the minimum wage will continue. The GOP-crafted legislation aimed to neutralize one major Democratic campaign issue - the minimum wage - and advance a Republican priority, a cut in the death tax, before the November elections where control of Congress is at stake. HR 5970 would increase the $5.15 minimum wage to $7.25 over three years and reduce death taxes beginning in 2011. Under President Bush's first tax cut, the death tax shrinks through this decade and disappears in 2010 but reappears at older and higher rates in 2011.The bill increases the amount of an estate exempt from taxation to $5 million for an individual and $10 million for a couple. Estates worth up to $25 million would be taxed at capital gains rates, currently 15 percent and scheduled to increase to 20 percent. The top tax rate on larger estates would fall to 30 percent by 2015.
S-OX LEGISLATION: Legislation (HR 5405 and S 2824) has been introduced in the House and Senate to exempt small companies from auditing requirements in the Sarbanes-Oxley (S-OX) corporate-governance law. Business groups have lobbied for easing Sarbanes-Oxley’s Section 404, which requires outside auditors to approve internal financial controls at all companies. The law, which applies to public companies, passed in 2002 in the wake of the Enron and WorldCom scandals. The new bills would allow companies with less than $700 million of market capitalization, less than $125 million of product revenue or fewer than 1,500 shareholders to opt out of Section 404 rules. House and Senate supporters pointed to statistics showing that the cost of completing a Section 404 audit has chilled market growth and led new public companies to list on overseas stock exchanges rather than in the United States.
PENSION REFORM PASSES: After months of negotiations, House-Senate conferees finally reached agreement on a pension reform bill. The House and Senate passed the compromise measure and have sent the bill to the White House for the President’s signature. The Pension Protection Act (HR 4) includes new funding requirements to ensure employers adequately and consistently fund their pension plans, provide workers with meaningful disclosure about the financial status of their benefits, and protect taxpayers from a possible multi-billion dollar bailout of the federal Pension Benefit Guaranty Corporation (PBGC). Specifically, HR 4 tightens funding requirements so employers make more cash contributions to their worker pension funds; closes loopholes that allow underfunded plans to skip pension payments; enhances disclosure to give workers and retirees more information about the status of their pension plans; and protects multiemployer pension plans for workers and their employers.
LESS THAN 100 DAYS: Election Day (November 7) is less than 100 days away and the Republican majority in the House and the Senate may well be in danger. In the Senate, the recipe for Democrats to reclaim the majority is simple, but not easy. For the Democrats to take control of the Senate, they have to defeat five Republican incumbents, listed here in approximate order of vulnerability: Senators Rick Santorum (PENNSYLVANIA); Lincoln Chafee (RHODE ISLAND); Conrad Burns (MONTANA); Mike DeWine (OHIO); and Jim Talent (MISSOURI). In addition to defeating these five Senators, Democrats will have to win Senator Bill Frist's (TENNESSEE) open seat, which will be difficult. The only other possible Democratic pickups are extreme long shots -- in ARIZONA, where Senator Jon Kyl is running for re-election, and VIRGINIA, where George Allen is seeking a second term. Even if Democrats are successful in all these contests, they would still have to hold every one of their own seats and a hotly contested open seat in MINNESOTA. With Congress and the President both having low poll numbers, it seems undeniable that a strengthening hurricane will hit the GOP in November. According to one pundit, if the storm is a Category 1, 2, or 3, Republicans will almost surely hold the Senate and probably hold the House. If it is a Category 4, the House will probably flip, and the Senate might as well. If the hurricane is a Category 5, the GOP majorities are history.
Prepared by Kent & O'Connor, Incorporated, and sponsored by the ASA Government and Public Affairs Program.
