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Coming Changes in Tax Policy and Domestic Politics
 

Coming Changes in Tax Policy and Domestic Politics

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    Coming Changes in Tax Policy and Domestic Politics Coming Changes in Tax Policy and Domestic Politics Presentation Transcript

    • Summit 2011 Director and Officers Training Conference December 2, 2011 The View from Washington and Industry Leadership Joan Woodward Executive Vice President, Public Policy The Travelers Companies, Inc.
      • Election Results – A New Mandate for Change
      • Legislative Recap
        • Super Committee Failure ---- Now What?
        • Healthcare Law
        • Dodd-Frank Act
        • Economic Outlook
      Washington Policy and Political Outlook
    • Electoral College – Mandate for Change But Did the Democrats Overreach? Obama: 364 McCain: 174
    • Republicans Take Back the House
    • Republicans Make Gains in the Senate BALANCE OF POWER 51 Democrats 2 Independent 47 Republicans
    • In 2010, Republicans Regain the House After Four Years Democrats - 53 *incl. two Independents - 6 Democrats - 59 *incl. two Independents Republicans - 46 + 6 Republicans - 41 Gain/Loss** 2009-2010 U.S. Senate January 2011 Independent - 2 Democrats - 193 - 62 Democrats - 255 Republicans - 242 + 64 Republicans - 178 January 2011 2009-2010 Gain/Loss* U.S. House
    • United States Governors Offices by Party November 1, 2010 Democrat: 28 Republican: 22
    • United States Governors Offices by Party November 3, 2010 Republican: 29 Democrat: 20 Independent: 1
    • Republican Presidential Primary Candidates
      • Representative Michelle Bachmann, Minnesota
      • Herman Cain, Former CEO
      • Newt Gingrich, Former Speaker of the House
      • Jon Huntsman, Former Governor of Utah, Former Ambassador to China
      • Representative Ron Paul, Texas
      • Governor Rick Perry, Texas
      • Mitt Romney, Former Governor of Massachusetts
      • Rick Santorum, Former Senator from Pennsylvania
    • Budget Battles to Continue….
      • Government Shutdown Avoided in April and debt ceiling raised August 2 nd
      • Current U.S. Debt over $15 Trillion
      • Debt Ceiling Default Avoided
        • Established caps on discretionary spending thru 2021
        • Requires a vote on a balanced budget amendment in 2011
          • House rejected Amendment Nov. 18 th by a vote of 261 in favor to 165 opposed
        • Established procedures to increase the debt limit by $400 Bil. on August 2 nd
      • S & P Downgrade of U.S. Government Treasuries
    • Super Committee Membership
              • Who we thought would be the Compromisers…
      Fred Upton (MI) Dave Camp (MI) Jeb Hensarling (TX & Co-Chair) Chris Van Hollen (MD) James Clyburn (SC) Xavier Becerra (CA) House Pat Toomey (PA) Rob Portman (OH) Jon Kyl (AZ) John Kerry (MA) Max Baucus (MT) Patty Murray (WA & Co-Chair) Senate Republican Republican Republican Democrat Democrat Democrat
    • Super Committee Failure….
      • Across-the-board spending cuts now triggered
      • Cuts will total $1.2 Trillion over a ten year period and will come from the following:
        • Defense Cuts: $492 Billion
        • Non-Defense Cuts: $492 Billion
        • Reduction in Debt Service Costs: $215 Billion
      • Cuts do not go into effect until January 2, 2013
      • President Obama has threatened to veto any legislation amending the mandatory spending cuts
    • Healthcare Law
      • U.S. House voted to repeal the healthcare law in January: 245-189 vote
      • Repeal failed in Senate: 47-51 vote
        • 4 moderate Democrats (Joe Manchin, D-WV; Ben Nelson, D-NE; Claire McCaskill, D-MO; Jon Tester, D-MT) looking to repeal individual mandate
      • Law has been ruled on by 4 district courts and 4 appeals courts
        • District courts in Detroit, Michigan and Lynchburg, Virginia upheld the law
        • District court in Richmond, Virginia ruled the individual insurance coverage mandate to be unconstitutional. September, 2011, 4 th Circuit Court of Appeals ruled that Virginia has no right to challenge law
        • District Court in Pensacola, Florida deemed entire law unconstitutional
        • 6 th Circuit Court of Appeals, Cincinnati, Ohio ruled that the individual mandate is a valid use of power
        • 11 th Circuit Court of Appeals, Atlanta, Georgia ruled that individual mandate is unconstitutional but the rest of the law can stand
        • D.C. Circuit Court of Appeals upheld law in its entirety
      • Supreme Court to hear arguments on 11 th Circuit case March 2012 with ruling expected in June 2012
      • Largest Regulatory Change to the U.S. Financial System since the Great Depression
      • Impacts virtually every sector of the U.S. economy – mostly banks
      • Two Main Goals behind the Act:
        • Limiting future risk taking to prevent “systemic risk” before it happens
        • Consumer Financial Protection Agency
          • Elizabeth Warren leaves government to run for Massachusetts Senate seat
          • Richard Cordray, former Ohio Attorney General, nominated
      Dodd-Frank Act
    • 2001 Bush Tax Cuts Extended Thru End of 2012
      • Tax Relief expiring December 31, 2012
        • Extension of current tax rates
          • Top marginal tax rate for individuals is 35.0%
          • Maximum long-term rate for capital gains and dividend income is 15.0%
          • Maximum estate tax rate is 35%; first $5 million exempt
        • Many middle-income taxpayers exempt from alternative minimum tax (AMT)
        • Tax credits for children, education and other incentives
      • Tax Relief expiring December 31, 2011
        • 2% payroll tax holiday for employees (reduce FICA from 7.65% to 4.65%, up to wage base cap of $105K)
        • One-year 100% expensing of investments (including equipment) for businesses; 50% second year
        • Unemployment benefits for long-term jobless
        • President Obama proposes extending thru 2012
    • U.S. GDP Quarter-Over-Quarter Change Unemployment hit 10.8% during the Reagan Recession First 4 consecutive quarters of negative GDP growth since 1947
    • University of Michigan Index of Consumer Sentiment Source: University of Michigan October 2011: 60.9 November 2011: 64.1
    • A Jobless Recovery in the US Continues Source: United States Department of Labor, Bureau of Labor Statistics
      • Unemployment Rate in
      • October 2011 was 9.0%:
      • Current Unemployment
      • Demographic Data:
      • African American: 15.1%
      • Asian: 7.3%
      • Hispanics: 11.4%
      • White Americans: 8.0%
      • W/O High School Deg: 13.8%
      • With High School Deg: 9.6%
      • Some College: 8.3%
      • With College Deg: 4.4%
      • Unemployment Status:
        • 57.1% for more than 15 wks
        • 42.8% for more than 27 wks
      Unemployment hit 10.2% in October 2009 December 2007: Unemployment Rate: 4.9% -Beginning of Recession
    • U.S. Federal Deficit ($in Billions) Source: Congressional Budget Office Clinton Surplus Years 2009 US Budget Deficit Hit $1.4 Trillion
    • US State and Municipal Debt Crisis
      • $1 Trillion of unfunded liabilities
        • Pension and other post-employment benefits
      • Combined 2011 budget shortfall of $125 billion
        • High jobless rates, reduction in state and local tax receipts
      • Federal Intervention
        • Bankruptcy
          • Currently only municipalities can file for protection
          • Some discussion that states may be allowed to file for bankruptcy, but this is not likely
          • Largest municipal debt bankruptcy in history in Jefferson County, Alabama; over $1 Billion
      1 Source: Pew Center on the States – “ The Trillion Dollar Gap ” (February 2010) 2 Source: Center on Budget and Policy Priorities 1 2
    • State Budget Battles Continue Brown: 49% Approval Scott: 37% Approval Dayton: 52% Approval Malloy: 41% Approval Kasich: 35% Approval Walker: 37% Approval
      • WI: $3.6 Billion Deficit
      • Ended collective bargaining rights for most state employee unions
      • Recall elections validated Governors plan
      • MN: $5 Billion Deficit
      • Twenty day shutdown over budget
      • Delayed payment of school funds and borrowed against state’s tobacco settlement
      • OH: $8 Billion Deficit
      • Privatized state prisons
      • Tied teacher pay to student achievement
      • FL: $3.6 Billion Deficit
      • Cut $1.35 Billion for schools
      • 4,500 state government positions eliminated
      • Mandatory drug tests for welfare recipients
      • CT: $3.2 Billion Deficit
      • Sales and retroactive income tax increases
      • Union concessions demanded
      • CA: $25 Billion Deficit
      • Cut $3 Billion for schools
      • 70 state park closures
    •