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An Open Letter to President Obama: Don't Punish Health Pioneers

Posted by Rick Lord on Oct 30, 2013 7:33:00 AM

Editor's note - Richard C. Lord, President and Chief Executive Officer of Associated Industries of Massachusetts, sent the following open letter to President Barack Obama in advance of the president's speech in Boston today on health care reform.

Dear President Obama,

Welcome to Faneuil Hall, birthplace of the groundbreaking 2006 Massachusetts health care reform that served as the model for the federal Affordable Care Act (ACA). Many of us who formed the extraordinary coalition of employers, doctors, hospitals, insurers, consumers and political figures that hammered out the Massachusetts reform were in the same hall seven years ago when then-Governor Mitt Romney signed the law.

ObamaBut as you speak today, thousands of small employers are concerned that key provisions of the ACA that were supposed to dovetail with the Massachusetts reform instead threaten to accelerate the already burdensome cost of health insurance for employers and citizens. Employers are particularly disappointed that your administration recently rejected Governor Deval Patrick’s request for a waiver from two small provisions of federal reform that threaten to raise health insurance rates for many small businesses here by more than 50 percent.

The first provision limits to four the rating factors used to calculate small group health insurance premiums – age, family size, geographic area and tobacco use. Massachusetts law currently allows for additional consideration of industry, participation rate, group size, intermediary discount and group purchasing cooperatives. A study by health insurance companies predicts that the rating changes could raise or lower rates for small companies by up to 57 percent, on top of average increases of 3.7 percent in their base insurance premiums.

The second provision is that ACA requires states like Massachusetts that have merged the health insurance markets for individuals and small businesses to set premium rates annually.  Massachusetts currently sets rates quarterly.

Secretary of Health and Human Services Kathleen Sebelius notified Massachusetts on September 3 that the federal government was rejecting the governor’s application for a waiver from the rating-factor limitations and annual rate setting. We’re left to wonder why Massachusetts stands to be penalized for having successfully figured out health reform during the past seven years.

The waiver issue remains particularly frustrating because we here in Massachusetts have become accustomed to working together to adjust, debate, update and revise the 2006 reform law to ensure its success. The coalition of unlikely partners has endured plenty of disagreements and table pounding through both Republican and Democratic governors, but Massachusetts has ultimately persevered and accomplished much of what the ACA is now asking the 49 other states to do.

The percentage of Massachusetts residents without health insurance has dropped from 8 percent before reform to a best-in-the-nation 2 percent today. Employers have stepped up as well, with 77 percent offering health insurance to employees versus 70 percent in 2005.

And Massachusetts is again moving ahead of the rest of the country to tackle the unfinished business of ensuring that its world-class health care system is affordable for employers and individuals alike.  The Legislature last year approved, and Governor Patrick signed, a health-cost control law that will limit increases in medical spending to the overall economic growth rate in Massachusetts – 3.6 percent this year.

As the Boston Globe noted in an editorial in March: “The Obama administration needs to pay special attention here. Imposing one-size-fits-all regulations on a state that already has universal health care and is leading the way on cost containment is counterproductive to say the least.”

Massachusetts employers have other concerns about the ACA as well.

  • A third-party analysis conducted for the state estimates that the health-care premium tax included in the ACA will cost employers and consumers in Massachusetts $213 million in 2014 and $3 billion during the next decade.
  • ACA will shift employers with between 51 and 100 employees into the merged health insurance market in 2016, resulting in an average increase of up to 9 percent for those companies.
  • A 2.3 percent tax on medical devices that took effect January 1 as part of federal reform will cost one of the commonwealth’s fastest growing industries $411 million a year, according to the Pioneer Institute.

Associated Industries of Massachusetts (AIM) and its 5,000 member employers are proud to have supported the 2006 Massachusetts health reform as a step toward repairing a health-care system that choked the life out of the economy for decades. We undertook an exhaustive educational effort at the time to ensure that every Massachusetts employer, from multinational financial institutions in Boston to restaurants in North Adams, understood their shared responsibilities under an enormously complex law.

AIM’s concerns about ACA do not diminish our support for the mission of both state and federal health reform to make health insurance more affordable and accessible to Americans. Our concerns about ACA are practical, not political. But the rancorous national debate about the fundamental wisdom of health care makes it nearly impossible to solve employer concerns about ACA in the same collaborative manner we used in Massachusetts.

Although we were pleased to be the model for rest of the country, the member employers of AIM respectfully urge you to reconsider Governor Patrick’s waiver request and allow our commonwealth to continue the laudable progress it has made to control health costs for employers and consumers. We would very much like the Affordable Care Act to live up to its name.

We wish you a good visit to Boston and continued success.

Sincerely,

Richard C. Lord
President & Chief Executive Officer

 

Topics: Barack Obama, Health Care Reform, Health Care Costs

Obama Climate Plan Could Benefit Massachusetts Employers

Posted by Robert Rio on Jun 25, 2013 4:25:00 PM

The climate-change plan and proposed carbon dioxide emission standards announced today by President Barack Obama represent one of those rare occasions when new regulation may benefit Massachusetts employers.

Climate changeThe reason - Massachusetts ratepayers and employers have already borne the brunt of stringent Massachusetts-only carbon standards and taxes that have resulted in the highest electric rates in the country. Now that other states are faced with increased costs and regulation, Massachusetts businesses may see some competitive relief.

AIM has long supported action at the federal level to level the playing field for Massachusetts customers. Depending on the programs included in the Obama plan and how they are structured and financed, Massachusetts ratepayers could actually benefit from several elements.

The blueprint has several priorities:

  • Carbon dioxide emission standards for new and existing power plants and development of clean energy
  • New mileage standards for trucks and buses and advanced transportation technologies
  • New energy efficiency standards and investments
  • Other programs related to reduce hydroflourocarbons and methane, both very potent greenhouse gases and related to federal agencies


Massachusetts power plants are already the cleanest in the country, and because the Obama plan focuses on coal-fired power plants, any emission reductions are unlikely to have much of an impact in the Bay State. Massachusetts only has one significant coal-fired plant left (Brayton Point in Somerset) and it is already complying with the most stringent emission limits in the country. Federal standards will probably have little cost impact on operations here.   

Savings could also come to ratepayers from new federal efficiency standards and energy efficiency programs, which may eliminate ratepayer financed subsidies. Ratepayers currently pay more than $700 million per year to finance energy efficiency programs in Massachusetts that provide rebates for equipment upgrades. To the extent that federal initiatives duplicate the Massachusetts programs or render them unnecessary, it may reduce costs for consumers.

Research on new energy technologies and carbon-capture technologies may also result in money being directed to universities in the area.

A properly designed national program could benefit Massachusetts ratepayers while reducing greenhouse gas emissions. AIM will work with state and federal agencies to make sure that the programs are cost-effective and use taxpayer and ratepayer money to get measurable reductions.

Topics: Barack Obama, Issues, Environment

What Will the Fiscal Cliff Agreement Mean to Employers?

Posted by Brad MacDougall on Jan 3, 2013 2:05:00 PM

The American Taxpayer Relief Act of 2012 signed yesterday by President Barack Obama contains broad business tax provisions that will affect virtually every employer in Massachusetts. The so-called “fiscal cliff deal” extends 31 business tax breaks and 12 energy tax breaks while partially extending current tax brackets.

TaxThe bill does not, however, extend the temporary payroll-tax rate reduction, a policy sure to engender significant conversation between employees and their HR departments when the first paychecks of 2013 are issued.

Here is a summary of provisions of interest to business owners and managers:

Tax credit for research and experimentation expenses.  The bill extends for two years, through 2013, the research tax credit equal to 20 percent of the amount by which a taxpayer’s qualified research expenses for a taxable year exceed its base amount for that year and provides an alternative simplified credit of 14 percent.  The bill also modifies rules for taxpayers under common control and rules for computing the credit when a portion of a trade or business changes hands.

Work opportunity tax credit.  This bill extends for two years, through 2013, the provision that allows businesses to claim a work opportunity tax credit equal to 40 percent of the first $6,000 of wages paid to new hires of one of eight targeted groups.   These groups include members of families receiving benefits under the Temporary Assistance to Needy Families (TANF) program, qualified ex-felons, designated community residents, vocational rehabilitation referrals, qualified summer youth employees, qualified food and nutrition recipients, qualified SSI recipients, and long-term family assistance recipients.

15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements.  The bill extends for two years, through 2013, the temporary 15-year cost recovery period for certain leasehold, restaurant, and retail improvements, and new restaurant buildings, which are placed in service before January 1, 2014. The extension is effective for qualified property placed in service after December 31, 2011.

Bonus depreciation.  Under current law, businesses are allowed to recover the cost of capital expenditures over time according to a depreciation schedule.  For 2008 through 2010, Congress allowed businesses to take an additional depreciation deduction allowance equal to 50 percent of the cost of the depreciable property.  Federal law expanded this provision to allow 100 percent bonus depreciation for investments placed in service after September 8, 2010 and before 2012 and 50 percent bonus depreciation for investments placed in service during 2012.  This provision would extend the current 50 percent expensing provision for qualifying property purchased and placed in service before January 1, 2014 (before January 1, 2015 for certain longer-lived and transportation assets) and also allow taxpayers to elect to accelerate some AMT credits in lieu of bonus depreciation.  This provision also decouples bonus deprecation from allocation of contract costs under the percentage of completion accounting method rules for assets with a depreciable life of seven years or less that are placed in service in 2013. For regulated utilities, the provision clarifies that it is a violation of the normalization rules to assume a bonus depreciation benefit for ratemaking purposes when a utility has elected not to take bonus depreciation.

9% Credit Rate Freeze for the Low-Income Housing Tax Credit Program.  The low-income housing tax credit program provides a tax credit over a period of ten years after the housing facility is placed-in-service.  The credit provided each year is determined by present-value formula based on the federal cost of borrowing.  Over the past few years, as the federal cost of borrowing has declined, so has the amount of tax credits that can be used to build a LIHTC project.  To deal with this, in 2008, Congress adjusted the formula and set a minimum credit amount of 9%, which is based on the original credit rate when the program was created.  The provision is effective for facilities placed-in-service before December 31, 2013.  This proposal would extend the expiration date by changing the deadline to projects that have received an allocation before January 1, 2014.

New Markets Tax Credit.  Through the New Markets Tax Credit (NMTC) program, the federal government is able to leverage federal tax credits to encourage significant private investment in businesses in low-income communities. The program provides a 39 percent tax credit spread over seven years.  The bill extends for two years the new markets tax credit, permitting a maximum annual amount of qualified equity investments of $3.5 billion each year.

Employer wage credit for activated military reservists.  The bill extends for two years, through 2013, the provision that provides eligible small business employers with a credit against the employer’s income tax liability for a taxable year in an amount equal to 20 percent of the sum of differential wage payments to activated military reservists.

Returning Heroes and Wounded Warriors Work Opportunity Tax Credits. Currently businesses are allowed to claim a work opportunity tax credit (WOTC) for hiring qualified veterans in the following targeted groups and up to the following credit amounts:

  • Veterans in a family receiving supplemental nutrition assistance:  $2,400
  • Short-term unemployed veterans:  $2,400
  • Service-related disabled veterans discharged from active duty within a year:  $4,800
  • Long-term unemployed veterans:  $5,600
  • Long-term unemployed service-related disabled veterans: $9,600

A credit against Social Security taxes is also available to tax-exempt employers. Transfers are made from general revenues to make the Social Security trust fund whole.  The provision expires on December 31, 2012.  The proposal would extend these credits for an additional year, though 2013. 

Temporarily extend increase in the maximum amount and phase-out threshold under section 179. Under current law, a taxpayer with a sufficiently small amount of annual investment may elect to deduct the cost of certain property placed in service for the year rather than depreciate those costs over time.  The 2003 tax cuts temporarily increased the maximum dollar amount that may be deducted from $25,000 to $100,000.  The tax cuts also increased the phase-out amount from $200,000 to $400,000.  These amounts have been further modified and extended several times on a temporary basis, increasing up to a high of $500,000 and $2 million respectively for taxable years beginning in 2010 and 2011, and then to $125,000 and $500,000 respectively for taxable years beginning in 2012, before reverting to the permanent amounts of $25,000 and $200,000 respectively for taxable years beginning in 2013 and thereafter. The modified proposal would increase the maximum amount and phase-out threshold in 2012 and 2013 to the levels in effect in 2010 and 2011 ($500,000 and $2 million respectively). Within those thresholds, the proposal would also allow a taxpayer to expense up to $250,000 of the cost of qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property. This proposal expires at the end of 2013 and the amounts revert to $25,000 and $200,000, respectively.

Treatment of certain dividends of regulated investment companies (RIC’s).  The bill extends a provision allowing a RIC, under certain circumstances, to designate all or a portion of a dividend as an “interest-related dividend,” by written notice mailed to its shareholders not later than 60 days after the close of its taxable year. In addition, an interest-related dividend received by a foreign person generally is exempt from U.S. gross-basis tax under sections 871(a), 881, 1441 and 1442 of the Code. The proposal extends the treatment of interest-related dividends and short-term capital gain dividends received from a RIC to taxable years of the RIC beginning before January 1, 2014.

Look-through treatment of payments between related controlled foreign corporations under the foreign personal holding company rules.  The bill allows deferral for certain payments (interest, dividends, rents and royalties) between commonly controlled foreign corporations (CFC).  This provision allows U.S. taxpayers to deploy capital from one CFC to another without triggering U.S. tax. The proposal extends present law to the end of 2013.  The proposal is effective for tax years beginning after December 31, 2011.

Special rules for qualified small business stock.  Generally, non-corporate taxpayers may exclude 50 percent of the gain from the sale of certain small business stock acquired at original issue and held for more than five years. For stock acquired after February 17, 2009 and on or before September 27, 2010, the exclusion is increased to 75 percent. For stock acquired after September 27, 2010 and before January 1, 2012, the exclusion is 100 percent and the AMT preference item attributable for the sale is eliminated. Qualifying small business stock is from a C corporation whose gross assets do not exceed $50 million (including the proceeds received from the issuance of the stock) and who meets a specific active business requirement. The amount of gain eligible for the exclusion is limited to the greater of ten times the taxpayer’s basis in the stock or $10 million of gain from stock in that corporation. The provision extends the 100 percent exclusion of the gain from the sale of qualifying small business stock that is acquired before January 1, 2014 and held for more than five years. The bill also clarifies that in the case of stock acquired after February 17, 2009, and before January 1, 2014, the date of acquisition for purposes of determining the percentage exclusion is the date the holding period for the stock begins.

Reduction in S corporation recognition period for built-in gains tax.  If a taxable corporation converts into an S corporation, the conversion is not a taxable event. However, following such a conversion, an S corporation must hold its assets for a certain period in order to avoid a tax on any built-in gains that existed at the time of the conversion. The American Recovery and Reinvestment Act reduced that period from 10 years to seven years for sales of assets in 2009 and 2010.  The Small Business Jobs Act reduced that period to five years for sales of assets in 2011.  The bill extends the reduced five-year holding period for sales occurring in 2012 and 2013.  In addition, this bill clarifies rules for carryforwards and installment sales.

Empowerment zone tax incentives.  The bill extends for two years the designation of certain economically depressed census tracts as Empowerment Zones. Businesses and individual residents within Empowerment Zones are eligible for special tax incentives.

Payroll Tax Increase

The end of the payroll tax reduction creates employee-relations challenges for companies.

Effective January 1, employers should withhold 6.2 percent for employee Federal Insurance Contribution Act (FICA) contributions.  The payroll tax has increased to its previous rate of 6.2%.  In recent years, employees experienced a lower rate of 4.2% and therefore greater take home pay as a result of the temporary 2% decrease in employee contributions to FICA.  The Congressional Budget Office reports that the payroll tax increase will raise $95 billion.

Important for employers & employees:

  • Your next payroll and paycheck - Employers may want to consider communicating to employees that their next paycheck will be lower as a result of the payroll tax increase. The Tax Policy Center in Washington, D.C., reports that 80 percent of households with incomes between $50,000 and $200,000 will pay higher taxes.   Among the households facing higher taxes, the average increase would be $1,635.  Individuals can estimate how much more in FICA taxes they will pay in the new year by using this calculator.
  • Payroll accuracy and treble damages - For Massachusetts employers especially, accurate payroll accounting is vital given that state law mandates treble damages for any violation of wage and hour violations, event for honest mistakes.

Topics: Barack Obama, Issues, U.S. Congress, Taxes

Obama Jobs Plan Seeks to Restore Employer Confidence. Is it Working?

Posted by Christopher Geehern on Sep 9, 2011 11:45:00 AM

President Barack Obama unveiled his $447 billion jobs bill last night hoping to restore some of the economic confidence employers need to accelerate hiring. The president’s speech to a joint session of Congress came a week after the AIM Business Confidence Index slipped into negative territory for the first time in a year.

So, does the plan make you more confident? Will it influence your hiring plans? Please let us know in the comments section below.

Here are some of the key elements of the American Jobs Act, compiled by Reuters:

  • Employee Tax Holiday – A $175 billion, one-year extension and expansion of the employee payroll tax holiday that would halve the tax rate to 3.1 percent in 2012.
  • Employer Payroll Tax Holiday - Sixty-five billion dollars to encourage small businesses to hire more workers. The initiative includes halving employer payroll taxes to 3.1 percent for the first $5 million of a company's wage bill in 2012, a change the administration says will reach 98 percent of small businesses. Also includes a complete payroll tax holiday for increasing the size of the payroll by up to $50 million above the prior year, either by hiring new workers or raising the salaries of the existing labor force.
  • Extend 100 percent company expensing into 2012 - At a cost of $5 billion, the president wants to extend a 100 percent expensing tax break for companies, allowing them to immediately take a tax deduction for investment in new plant and equipment.
  • Housing - Broaden homeowner access to mortgage refinancing and help the battered housing market by allowing households to take advantage of low borrowing costs that would help them put their finances on a sound footing.
  • Eighty-Five Billion Dollar for State and Local Governments - Includes $35 billion to keep teachers, firefighters and police officers in their jobs, of which $30 billion would go to schools and $5 billion to police and firefighters; $30 billion to modernize schools and community colleges; $15 billion to rehabilitate and refurbish vacant and foreclosed homes; and $5 billion to help low-income youths and adult workers, supporting summer and year-round jobs for young people and support subsidized work for unemployed low-income workers.
  • Road, Rail and Aviation Infrastructure Spending - Includes $50 billion to invest in highways, transit, rail and aviation, including upgrading U.S. airports and supporting Nextgen Air Traffic modernization.
  • Infrastructure Bank -  A $10 billion proposals to capitalize an infrastructure bank to leverage private and public infrastructure investment "without earmarks or traditional influence," the White House says.
  • Extend Unemployment Insurance, Bridge to Work – Forty-nine billion dollars for a one-year extension of long-term unemployment benefits that would otherwise expire, an action the White House says would prevent 6 million jobless Americans from losing benefits. It includes reforms to the jobless aid system and a "bridge to work" program to help get unemployed people back to work. Also, $8 billion for tax credits for hiring the long-term unemployed.

Topics: Barack Obama, Economy, Jobs

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