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BPAA Biweekly Federal Policy Updates - August 23, 2019

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LABOR AND MINIMUM WAGE

  • From Politico - Could A Tight Senate Race Tip The Scale For A $15 Minimum Wage?: "Former Colorado Gov. John Hickenlooper, who dropped out of the Democratic presidential primary race one week ago, announced Thursday that he will challenge Republican Sen. Cory Gardner in 2020," POLITICO's Quint Forgey and James Arkin report. Hickenlooper joins a strong pack of well-funded Democrats seeking to unseat Gardner, but national Democrats "believe Hickenlooper's experience and name identification in the state would make him the safest bet for the must-win race."
    • Hickenlooper has called for raising the federal minimum wage to $15 and phasing in the increases based on an area's cost of living. Colorado voters in 2016 approved raising the state's minimum wage to $12 by 2020. The measure was popular in the state, passing by more than a 10-point margin, with 55 percent of Coloradans voting in favor of it.
    • It's unlikely Gardner will have to vote on Democrats' legislation to raise the minimum wage to $15, as the Republican-controlled Senate is not expected to take it up. But Colorado may represent Democrats' best opportunity to flip a GOP-held Senate seat and to notch another Senate vote in favor of the legislation.
    • "Democrats need a net gain of three seats, along with a White House victory that would bring the vice president's tie-breaking vote, in order to take back the Senate," Forgey and Arkin write. The threat of a Senate flip could also pressure Republicans and the business community to play ball on a potential minimum wage increase now, or risk a more-liberal version of the legislation passing in a Democrat-controlled Congress. More from POLITICO.

 

  • Fluctuating Workweek Proposal Sent To Budget Office For Review: The Labor Department sent a proposal to OMB Thursday that would alter how employers calculate overtime for salaried employees with fluctuating workweeks, an official told Morning Shift. The proposal would "grant employers greater flexibility to provide additional forms of compensation to employees," according to the most recent regulatory agenda.
    • Under the Fair Labor Standards Act, overtime-eligible workers must be paid time and a half if they work more than 40 hours a week. But if a worker's hours vary each week, his or her employer may use an alternative method to calculate the overtime due. "Under this method, employees who are entitled to overtime pay receive a fixed weekly salary, which is divided by the actual number of hours an employee worked in the week to determine the week's base hourly rate," Lisa Nagele-Piazza, explained for SHRM. "The employees will then receive an additional 0.5 times their base rate for each hour worked beyond 40 in the workweek."
    • The Obama DOL was not a fan of this method and did not want to expand it. It issued a 2011 rule precluding employers who compensated their workers with bonus payments from using the method because it could allow employers "to pay a greatly reduced fixed salary and shift a large portion of employees' compensation into bonus and premium payments," potentially creating disparities. More from SHRM.
    • More Overtime: The department estimated that a proposed version of the rule would make 1 million workers newly eligible for time-and-a-half pay for all hours worked beyond 40 a week. That proposal significantly trimmed an Obama-era initiative that would have expanded overtime eligibility to some 4 million workers, but was tangled up in court.
    • Court Challenge: The DOL has been pushing to put the finishing touches on the rule by the end of the year so that it can be in place before the end of President Donald Trump’s first term. Worker advocates are widely expected to sue to block it, arguing that the department should instead be fighting to revive the Obama overtime rule, Ben Penn reports.

 

  • Bloomberg Government - Trump Wage Chief Overhauls Agency, Internal Documents Reveal: The Trump administration’s wage-and-hour chief is putting her own imprint on federal minimum pay and overtime enforcement through a wide-ranging bureaucratic reorganization designed to give political appointees more control, according to Labor Department documents obtained by Bloomberg Law.
    • The DOL Wage and Hour Division’s chain of command will be overhauled to give political leadership in Washington more oversight of the agency’s investigatory work throughout the country. Senior career executives, including a newly created data management position, will start reporting directly to a Trump-appointed deputy administrator. Certain government contracting and other enforcement positions have been eliminated, WHD Administrator Cheryl Stanton informed staff in an internal memo Aug. 22.

 

TAX UPDATE

  • Sen. Rick Scott (R-Fla.) is pushing to cut taxes on the middle class by the same amount as the U.S. is collecting from its tariffs. How exactly would that work? Scott's idea of essentially trading tariff revenue for tax cuts has been kicking around Washington for a few days now — for instance, Larry Kudlow, the director of the National Economic Council, brought it up on "Fox News Sunday" last weekend. The Florida senator then tweeted about the idea on Thursday: "When we get back from recess, we should immediately start working on a plan to reduce taxes for middle-class families & workers by the amount the Treasury is collecting in tariffs." It's tough to imagine that kind of plan getting the necessary support in the Senate right now, even though Kudlow has confirmed that he backs the idea. But experts also called the idea curious — a plan seeking to deal with the fallout of tariffs, without actually dealing with the tariffs themselves.  "If Congress is able to muster the votes to cut taxes, they should address the problem head on," said Adam Michel of the Heritage Foundation. "They should take back control of trade policy and eliminate the tariffs rather than trying to patch up the economic damage with some other woefully inadequate mechanism."
    • Another question: How much tax relief could potentially be offered through Scott's idea? The Treasury Department said this month that the U.S. is on pace to bring in $72 billion a year in tariffs.  For comparison's sake, the Penn Wharton Budget Model projected that a two-percentage point cut in the employee-side payroll tax cut, as done during the Obama administration, would cost between $141 billion and $151 billion if in place for 2020. (It would also boost the economy by 0.3 percent.) For whatever it's worth: Kudlow says the administration could put out a tax cut plan before November 2020, though nothing is imminent, as his boss said Wednesday.

 

  • The White House says a payroll tax cut isn't on the table, but President Donald Trump says he's "thinking" about it. The word from the president on Wednesday, August 21, was that he was "not looking at a tax cut now" because the economy is in a good place and that indexing capital gains was especially problematic because it would primarily benefit the wealthy. So to cap off the first three days of this August week: The White House pushed back on a Washington Post report that it was considering a payroll tax cut, only for Trump to then contradict that and say he was considering that and indexing capital gains — only for Trump to then say a day later he wasn't really considering either.
    • On indexing: Some of the conservatives who want Trump to index capital gains via executive authority gently pushed back on the idea that it would be merely a giveaway to the well off. Ryan Ellis of the Center for a Free Economy tweeted that "18 million households pay the cap gains tax every year. Indexing helps middle class longtime homeowners, seniors, family farmers, retail and restaurant business owners, folks with rental properties, stamp collectors, et al."
    • But the case for indexing capital gains being "somewhat elitist," as the president put it, is that most of the proceeds go to the top, no matter how many people benefit. The Penn Wharton Budget Model, for instance, has said that the top 1 percent would get around 86 percent of the benefits from indexing, which would reduce federal revenues by $102 billion over a decade.
    • The case for a payroll tax cut: Analysts from across the ideological spectrum have said that a payroll tax cut wouldn't be the best remedy if business investment is driving concerns about the economy. But Matthew Klein at Barron's makes the case for a payroll tax cut now, arguing that the tax system is currently more burdensome to the average worker than to holders of capital. "For the average worker, payroll taxes are worth about twice as much as the amount paid in federal income taxes. Reducing that burden would be a welcome development," Klein writes.
    • LET'S CHECK THE NUMBERS: CBO projects that the economy will grow at a 2.3 percent clip this year, before falling to an annual average rate of 1.8 percent over the next decade, via our Budget team's Jennifer Scholtes. On top of that, the budget office now sees the deficit climbing to $960 billion this year, up $63 billion from the previous projection. A key to solving America's fiscal problems, CBO says in summation, is significant tax changes that bring in more revenue.
      • And as The Wall Street Journal noted, Washington could face quite a quandary if a slowing economy is paired with big deficits — revenues would be coming in at a lower clip, but the debt level might make it difficult to further cut taxes.
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