Good Developments in Worrisome Times
The following post ran in the January 2010 issue of the ESOP Report as the Washington Report. We are re-printing the article on the blog.
Setting aside the horrible developments in Haiti, concerns over Islamist extremists not giving up the goal of killing as many Americans as possible, which triggers young American men and women being in far away places getting killed and maimed, and instead looking at what is the core reason for The ESOP Association’s banding together thousands of people wanting to further employee stock ownership, there were positive developments for ESOP law in Congress the last month of 2009.
Starting with the Senate, just before it left town on December 24th, three Senators, led by Senator Bernard Sanders [I-VT], introduced two non-tax, but pro-ESOP bills, S. 2909 and S. 2914. Given that in August Senator Blanche Lincoln [D-AR] had introduced S. 1612, primarily proposing pro-ESOP tax law changes, these two new bills widens the ability to garner more Senators to say, “I am for ESOPs.”
[Both bills are summarized on the Association’s website, and the website is a doorway to complete legislative information on all legislation of the 111th Congress through the site’s Capital Links button under Government Affairs. In general, S. 2909, titled the “Worker Ownership Readiness and Knowledge Act,” is to provide state programs to encourage employee ownership and participation in business decisionmaking throughout the U.S. S. 2914, titled the “United States Employee Ownership Bank Act,” is to provide for the establishment of a Federal lending program for certain ESOPs and employee-owned co-ops in the U.S. Department of Treasury.]
A bill such as S. 2909 was first introduced in the U.S. Senate in the late 80s by Senator Jeff Bingaman [D-NM], but did not resurface until Senator Sanders’ action.
When Senator Sanders served in the House of Representatives, he introduced a version of S. 2914 in two Congresses, first in 2004. There was a hearing on the bill, and both the Chair of the Association at that time, George Ray, now a Life Service Award member, and President Keeling testified on the legislation, along with ESOP participants from Vermont ESOP companies.
But just as important as the specifics of the bills is that Senator Sanders has been joined by three other Senators in endorsing the bills. They are Senators Leahy [D-VT], Brown [D-OH], and Menendez [D-NJ]. While Senator Leahy has been a champion for ESOPs for sometime, co-sponsoring S. 2909 and S. 2914, it is the first time that Senators Brown and Menendez have said to the world at large, “We are supportive of ESOPs.”
In the same vein, over on the House side in December, seven members came forward to co-sponsor pro-ESOP legislation, which was introduced earlier this year, and about which there was a December 2009 newsletter front page cover story.
Joining as co-sponsors of the pro-S ESOP tax proposed bill, H.R. 3586, were Congressmen Barney Frank [D-MA], Bob Goodlatte [R-VA], Bill Pascrell [D-NJ], and Gary Peters [D-MI]. Congressmen Frank and Goodlatte have in prior Congresses signed up publicly for pro-ESOP legislation, but Congressmen Pascrell and Peters are taking their stand for ESOPs publicly for the first time.
And signing up on the House Concurrent Resolution reiterating that the House still supports ESOPs were Congressmen Peter Roskam [R-IL], Bill Posey [R-FL], and Earl Pomeroy [D-ND]. Congressmen Posey and Pomeroy publicly signed up to co-sponsor ESOPs the first time, although in fairness, Congressman Pomeroy has been very positive in visits with North Dakota ESOP companies for over a decade.
Another big plus on these new “champions” in the 111th Congress for ESOPs is two of them, Congressman Pascrell and Congressman Pomeroy, are members of the House Ways and Means Committee, where 90 to 95% of the ESOP laws are considered for improvement, or curtailment.
As with most things in life, there are observers of the Washington, DC legislative process who are cynics about members of Congress co-sponsoring legislation, as it does not guarantee that any one of the members will be “working” to protect or expand the policy embodied in the proposals when behind closed doors so-called crunch time comes.
While a member of Congress co-sponsoring a bill that a private sector group likes does not guarantee that the member will vote to protect the group’s interest in a difficultly negotiated committee bill to raise taxes for example, it is evidence that he or she is more than likely to be an ally in the crunch. For example, let’s assume that the Senate Finance Committee is to raise taxes by $150 billion, and the Administration has made 25 proposals to raise the taxes, and one is to cutback on an ESOP tax benefit. There will be among the 24 other proposals some tax benefits that are near and dear to the men and women who have co-sponsored Senator Lincoln’s bill. Will they, behind closed doors, fight against the ESOP proposal, or will they stand aside on the ESOP proposal in order to protect something among the other 24 near and dear to their state’s interests? One never knows ahead of time. But someone who has publicly declared for ESOPs by co-sponsoring a bill promoting ESOPs, is more likely to stand for ESOP behind closed doors than someone who has not publicly indicated support for ESOPs. This observation is true in the House as well, and is the key point of TEA’s strategy that the best defense be a good offence in the legislative struggles.
So, why is all of these new and renewed support for pro-ESOP bills from members of Congress important? Well, back to the big picture—Congress and the Administration will soon be raising taxes to close the Federal deficit, as was the case in the 80s. And, as was the case in the 80s, cynics about ESOPs working in key staff positions for Congressional committees, and in key Federal agencies that regulate ESOPs, will propose cutting back, or eliminating ESOP tax incentives. So, crunch time may be around the corner, and the ESOP community will urge its publicly declared champions to stay the course for ESOPs.
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