FEDA Joins 140-Plus Business Groups in Backing Upcoming Senate Bill

More than 140 business and trade associations, including FEDA, have signed a letter supporting the repeal of the federal estate tax.

The tax, commonly known as the “death tax,” taxes the transfer of property and assets upon a person’s death. The tax is often a burden for small and family-owned businesses that must pay it to continue operating when an owner dies. For 2023, the filing threshold for the estate tax is $12,920,000.

The letter was drafted by the Family Business Coalition (FBC) and will be sent to Sen. John Thune, (R-SD), a longtime proponent of ending the estate tax. Thune is expected to introduce a bill that would repeal the estate tax sometime during the week of March 27.

The letter cites data from the Tax Foundation that states repealing the estate tax would create more than 150,000 jobs. Further, it points to a 2012 study by the House Joint Economic Committee that found the death tax, which contributes only one-half of one percent of total federal revenue, had destroyed over $1.1 trillion of capital in the U.S. economy.

“The death tax forces family businesses to waste money on expensive insurance policies and estate planning. These burdensome compliance costs make it even harder for business owners to expand their businesses and create more jobs,” the letter says.

“The death tax is unfair,” it continues. “It makes no sense to require grieving families to pay a confiscatory tax on their loved one’s nest egg. Far too often this tax is paid by selling family assets like farms and businesses. Other times, employees of the family business must be laid off and payrolls slashed. No one should be punished for fulfilling the American dream.”

The full letter is available here.

Bill Would Raise Requirements for Commercial Dishwashers, Fryers and Hold-Hold Cabinets

Two states, Colorado and New Mexico, are considering bills that would require appliances, including commercial foodservice equipment products, to meet ENERGY STAR program standards.

The bills, Colorado House Bill 23-1161 and New Mexico House Bill 185, would cover items such as commercial dishwashers, fryers, hot-food holding cabinets, ovens, and steam cookers. Colorado passed a similar bill in 2019 that heightened water and energy standards to match then-current ENERGY STAR requirements. The North American Association of Food Equipment Manufacturers was among the industry associations that advocated against the 2019 bill, stating that “while the bill is well-intended and NAFEM’s support for ENERGY STAR is strong, it raises several issues that could undermine this valuable, national program.”

The new bills would bring those state standards up to the ENERGY STAR program’s current requirements. The Colorado House Energy & Environment Committee referred its version of the bill to the Committee on Appropriations earlier this month. The New Mexico version of the bill is being considered by the state legislature’s House Energy, Environment & Natural Resources and Judiciary committees.

Restrictions Drove Up Prices of Steel 2.4 Percent and Aluminum 1.6 Percent

A report from the U.S International Trade Commission (USITC) found that American businesses are paying the cost of steel and aluminum tariffs.

The report was prepared in response to a direction from the House and Senate Committees on Appropriations in March 2022. Reviewing the years from 2018 to 2021, the study found that U.S. importers “bore nearly the full cost of these tariffs because prices increased at the same rate as the tariffs. The USITC estimated that prices increased by about 1 percent for each 1 percent increase in the tariffs under sections 232 and 301.”

Further, the UITC found the Section 232 tariffs reduced imports of affected steel products by 24 percent and increased the price of steel products in the United States by 2.4 percent. They also increased U.S. production of steel products by 1.9 percent, equal to $1.3 billion in increased production in 2021.

The impact on aluminum was even greater, with tariffs reducing imports by 31 percent. The cost of aluminum products rose by 1.6 percent while U.S. production went up 3.6 percent — equal to about $900 million in 2021.

Meanwhile, section 301 tariffs, which placed restrictions on a wider range of products sourced from China, reduced imports from the country by 13 percent, increased the value of U.S. production by 0.4 percent and increased the price of U.S. products by 0.2 percent.

As the North American Association of Food Equipment Manufacturers pointed out, the tariffs resulted in $173 billion of additional costs of U.S. businesses, workers, consumers and families.

Labor Force Now Exceeds Pre-Pandemic Levels

The economy is proving stronger and more resilient in the face of continued high inflation, rising interest rates and low consumer sentiment, according to the U.S. Chamber of Commerce’s March Current Economic Conditions report.

The economy grew by 2.1 percent in 2022 and is expected to grow another 1.4 percent in Q1 2023, the report found. However, there remains a 65 percent chance of a mild recession in mid-2023 and the Chamber is forecasting a 0.8 percent decline in Q2 and a 0.5 percent decline in Q3, before returning to growth (0.3 percent) by the end of the year.

“If there is to be a recession this year, it has been pushed back later than anticipated,” said Curtis Dubay, chief economist for the U.S. Chamber.

Inflation remains a significant drag on the economy. Food-at-home prices rose 10.1 percent year-over-year in February and inflation is outpacing wage increases 6 percent to 4.6 percent. Still, the rate of inflation is trending down from a height of 9.1 percent in mid-2022, albeit slowly.

With the Federal Reserve increasing interest rates rapidly in 2022 to curb inflation, borrowing costs for businesses rose throughout most of 2022. The average AAA corporate bond rate topped 5.3 percent last fall, but those rates appear to be settling now and were down to about 4.6 percent in March.

One possible reason why the economy has not recessed yet is the continued strength of the job market. There were 5.7 million unemployed people for 10.8 million job openings at the end of January. That imbalance can no longer be explained simply by people sitting out of the job market for COVID reasons, as the labor force is now around 166 million people, securely above the pre-pandemic February 2022 level. Despite this, the Chamber found that the country was still missing about 2.46 million workers.

The full report is available here.

Steve Forbes Critical of Fed Plan, Says “Prosperity Doesn’t Cause Inflation”

After a year of rising interest rates, Federal Reserve Chairman Jerome Powell warned businesses that rates could now go even higher than policymakers at the central bank had previously expected.

In remarks to the Senate Banking Committee on March 7, Powell said that faster wage growth and low unemployment levels had the Fed considering additional rate increases to bring the level of inflation back down to a more modest 2 percent. In February, the consumer price index was up 6 percent year-over-year and 0.4 percent compared to January.

“The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” Powell said. “If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.”

The prospect of further interest rate hikes has rankled businesses that are already experiencing higher costs for borrowing. Steve Forbes, chairman and editor-in-chief of Forbes Media and keynote speaker at the 2022 FEDA Annual Conference, said central bankers were “clueless about inflation” in his latest What’s Ahead video series. Forbes questioned the wisdom of slowing the economy over low unemployment, calling past attempts to do so a “blunder.” “Prosperity doesn’t cause inflation,” he said. The full video is available here.

Letter Urges Congress to Take Action to Update Permitting by End of Summer

The United States’ outdated permitting system has become one of the largest barriers to timely and cost-effective infrastructure projects across the country, and business groups and trade associations are asking Congress to take action by the end of this summer.

A new letter being circulated by the U.S. Chamber of Commerce, which has been signed by FEDA, is calling on congressional leaders to enact meaningful, durable legislation to modernize America’s permitting process. The letter argues that the United States cannot achieve any of its needed infrastructure projects, such as investing in transit systems and building new energy production transmission, if the permitting process is not improved.

“We are pleased to see support for modernizing our permitting process from across the ideological spectrum, and a recognition that the current system is broken,” the letter states. “We know there are differing perspectives in Congress on how best to address current challenges. Our organizations will not agree on every issue. We are committed, however, to working with Congress to find solutions and pass meaningful and durable legislation.”

The letter further outlines four principles that should serve as a starting point for legislation:

• Predictability — Project developers and financers must have an appropriate level of certainty regarding the scope and timeline for project reviews, including any related judicial review.
• Efficiency — Interagency coordination must be improved to optimize public and private resources while driving better environmental and community outcomes.
• Transparency — Project sponsors and the public must have visibility into the project permitting milestones and schedule through easily accessible public means.
• Stakeholder Input — All relevant stakeholders must be adequately informed and have the opportunity to provide input within a reasonable and consistent timeframe.

The full letter is available here.

Sen. Sanders Seeking Broad Authority to Interfere in Enforcement Proceedings

Sen. Bernie Sanders (I-VT) is seeking approval to broadly investigate unspecified violations of federal labor law by major corporations. The Senate Health, Education, Labor and Pensions (HELP) Committee, which Sanders chairs, is expected to vote on authorization for the investigations during their March 8, 2023, meeting.

The vote appears to be part of a larger effort by Sanders to subpoena Starbucks CEO Howard Schultz to testify about the coffee company’s compliance with federal labor law, but the scope of the request has drawn scrutiny from business groups. A collection of business organizations and trade groups, including FEDA, have signed a letter to the HELP Committee opposing the proposed all-encompassing investigation.

Noting that there is no precedent for this type of blanket authority to investigate businesses, the letter states that Sanders “provides no explanation for seeking such broad permission for his staff to interfere with existing investigations or enforcement proceedings being conducted by the multiple federal agencies that enforce our country’s labor laws.”

The letter continues: “As drafted, the authority sought also could permit the Chair to meddle in the affairs of any employer anywhere in the country at any time. The abuse of process by a committee to target individuals for their beliefs and/or for their assertion of their constitutional due process rights has historically been frowned upon.

"At a time when our country faces real challenges, including an ongoing workforce shortage, the recovery from the impacts of the pandemic on our education system, the ongoing rise in health care costs, and a dearth of retirement security, the HELP Committee and its staff could be focused on solutions to assist everyday Americans,” the letter states. “Rather, the Chair seeks HELP Committee members’ permission to focus on pursuing needless, unconstructive, undisciplined investigations of American employers.”

The full letter is available here.

Federal Agency Could Be Invalidated Over Appropriations Oversight

The Supreme Court is taking up a case regarding how the Consumer Financial Protection Bureau (CFPB) is funded, potentially leading to the elimination of the federal agency.

The agency was established in 2008 in response to the subprime mortgage crisis. Funding for the CFPB comes directly from the Federal Reserve, which collects fees from banks. This differs from most federal agencies, which receive funding through congressional appropriations. In October 2022, a three-judge panel of the U.S. Court of Appeals for the 5^th Circuit struck down a CFPB rule that prohibited lenders from making additional efforts to withdraw payments from borrowers’ bank accounts after two failed attempts due to a lack of funds. That ruling determined the CFPB’s funding violated the Constitution’s appropriations clause, which gives Congress the sole authority to withdraw money from the treasury.

In the wake of the 5^th Circuit’s ruling, the Biden administration asked the Supreme Court to review the case. A decision is not expected until 2024.

Business groups, including the U.S. Chamber of Commerce, believe the CFPB should be brought under Congress’ appropriations oversight.

“The Chamber welcomes the Supreme Court’s announcement today that it will hear a case challenging the funding mechanism of the Consumer Financial Protection Bureau,” said Neil Bradley, executive vice president and chief policy officer for the U.S. Chamber. “The CFPB’s broad power touches every consumer in the United States and its decisions often have far-reaching consequences. Recent actions by the agency to penalize responsible consumers who pay their bills on time is only the most recent example of why oversight is necessary.

“The lack of accountability to Congress has forced the plaintiffs in this case, as well as the Chamber in separate litigation, to go to court to defend against regulatory overreach. Given the significant impact it has on the financial services available to U.S. consumers, the CFPB should be brought under the appropriations process and have its budget subject to congressional oversight.”