DMGS Harrisburg Executive Director Named in Pennsylvania Power 100 List

Patty Mackavage, Harrisburg executive director with Duane Morris Government Strategies, was recently recognized by City & State PA as one of the 100 mostIMG_1230 politically influential Pennsylvanians in 2017. City & State PA, a media outlet covering Keystone Politics at the state and local level, credited Patty’s legislative work with three different governors, her diverse clientele and her knowledge of various issues impacting Pennsylvanians. Ranked at No. 60, Patty’s experience includes secretary and deputy secretary for legislative affairs in the administrations of both Governor Mark Schweiker and Governor Ed Rendell, as well as serving as legislative director for the Pennsylvania Department of Revenue during Governor Tom Ridge’s administration. With an expertise in the state budget process, and public finance/economic development, Patty now represents clients’ issues before the state legislature and local governments throughout Pennsylvania.

The 2017 City & State PA Power 100 list includes state and local officials, as well lobbyists, CEO’s, philanthropists, labor leaders and a number of other influential leaders in Pennsylvania. For a complete list of City & State PA’s Power 100, please visit City & State PA.

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Patty Mackavage with Ron Boston (L) and Stacy Gromlich (R) from the DMGS Harrisburg Team

 

Legislative Insight: Federal and State Gas Taxes

By Danny Restivo (posted 5/24/17)

Shortly after President Donald Trump entered the White House, he pledged a large investment in America’s infrastructure during a nationally televised address to Congress.

“To launch our national rebuilding, I will be asking the Congress to approve legislation that produces a $1 trillion investment in the infrastructure of the United States—financed through both public and private capital—creating millions of new jobs,” the President said during his February speech.

The American Society for Civil Engineers gave American infrastructure a D+ in its 2017 report card.Deteriorating infrastructure is impeding our ability to compete in the thriving global economy, and improvements are necessary to ensure our country is built for the future,” the report said. “While we have made some progress, reversing the trajectory after decades of underinvestment in our infrastructure requires transformative action from Congress, states, infrastructure owners, and the American people.”

The report also said current road conditions cost the country $160 billion in time and money every year, while a report from the Federal Highway Administration says the country’s transit system has a $90 billion backlog on repairs. Democratic lawmakers have long-supported federal dollars to help improve America’s roads, bridges, dams, airports and tunnels. Trump’s plan offers a rare opportunity for bi-partisan support in an increasingly fractured political environment.

While a final proposal has yet to be agreed upon, Trump has called for a public-private partnership, but that seems more viable in urban areas where companies can recoup money by levying tolls. In rural areas, where less people live, projects may not entice enough investment because of revenue concerns.

In early May, President Donald Trump signaled that he’s open to raising the federal gas tax to help subsidize infrastructure improvements.

“It’s something I would certainly consider,” the President said to Bloomberg News in an interview. His statement underscores an issue that’s plagued politicians for years. The last time Congress increased a nationwide gas tax was in 1993, when lawmakers approved a 19.3 cent per gallon tax on gasoline, and a 24.3 cent per gallon tax on diesel fuel. However, that tax has not adjusted for inflation, and the Highway Trust Fund has not kept pace. Since 2008, the federal government has injected $143 billion in the fund, while the tax has generated roughly $34 billion a year. However, the federal government usually spends $50 billion per year on transportation projects, leaving a $16 billion annual shortfall.

The Congressional Budget Office said the fund will become insolvent by 2021 without additional funding. According to the Joint Committee on Taxation, increasing the federal tax to 35 cents per gallon will create an additional $473.6 billion over a period of 10 years.

The Chamber of Commerce, AAA auto club and the American Trucking Association support a new gasoline tax. After the 2014 mid-term elections, the group sent a joint letter to the 114th Congress that lends support for a bill that increases the gas tax. 

“While no one wants to pay more, we urge you to support an increase to the federal fuels user fee, provided the funds are used to ease congestion and improve safety, because it is the most cost efficient and straightforward way to provide a steady revenue stream to the Highway Trust Fund.”

However, critics believe a gas tax will hurt working families by leveling fees on middle class commuters, many of whom supported Trump. Low gas prices may provide cover for a tax increase, but a sharp spike in gas prices could change consumer sentiments. In an interview with CNBC, Chevron CEO John Watson, pushed back against a tax on gas.

“I think a good first step would be to evaluate where existing taxes are going,” he said. “In other words, we have road taxes today. How are they being used? Are they being put to good use in rebuilding our infrastructure?”

In light of the debate, several states have increased their respective gas tax to shore up roads, bridges, tunnels and other state-operated transportation systems.Since 2015, sixteen states and the District of Columbia have enacted legislation to increase taxes on gas that help support infrastructure programs. According to American Road and Transportation Builders Association, voters approved 269 of the 361 transportation funding measures that appeared on township, city, county or state ballots in 2016. Many of these initiatives were approved in Democratic and Republican-dominated regions of the country. Furthermore, Louisiana, Minnesota, Oklahoma and Oregon have transportation funding measures pending in their respective legislatures.

Gas Tax Map

States Enacting Gas Taxes in 2017

California

The State Senate approved a 10 cent per gallon tax hike in April as part transportation bill estimated to raise $5.2 billion a year to repair state roads and highways. The legislation, which was backed by Governor Jerry Brown, increases the per gallon tax rate from 18 cents to 30 cents. The law also mandates $100 annual fee for electric cars, as well as annual fees ranging from $25 for cars valued at or under $5,000, to $175 for a car worth $60,000 or more. About $34 billion of the first $52 billion would go to repairing roads, bridges, highways and culverts, with most of the money split 50-50 between state and local projects.

Michigan

Michigan drivers saw a 7 cent tax increase in fuel prices at the beginning of the year, increasing a 19 cent per gallon tax to 26.3 cents per gallon, while diesel fuel will increase 11.3 cents from 15 to 26.3 cents per gallon as well. Lawmakers also approved a 20 percent increase in vehicle registration fees, while gas-electric hybrid and electric vehicles will experience an added $47 and $135, respectively. The hike is the first gas tax increase in 20 years, and aims to fund crumbling bridges and roads with an additional $2.3 billion over the next four years. The plan allocates 61 percent of the funding to counties, cities and villages, while the rest goes to state projects.

 

 

Indiana

Governor Eric Holcomb signed a $1.2 billion highway improvement plan in April which increases the Hoosier gas tax from 18 cents to 28 cents per gallon in July. Furthermore, registration and licensing fees will increase by $15. There’s also a $50 fee on hybrids and a $150 fee on electric cars. In addition, Holcomb intends to draft a plan that adds tolls for certain interstate projects by the end of 2018.

Montana

The Montana house assembly approved a bill this year that will levy a 6 cent per gallon gas tax increase phased-in over 6 years. More than four percent will take effect on July 1, while the remainder is implemented in 0.5 cent increments between 2019 and 2022. The Montana tax is expected to generate $28 million in 2018, and more in future years to help repair state roads and bridges, as well as the construction of new ones.

South Carolina

On May 10 the South Carolina House and Senate overrode a veto from Governor Henry McMaster to approve an infrastructure bill that increases the state’s gas tax. The legislation will enact a 12 cent per gallon increase phased in over six years, with a two cent increase occurring in July. The tax will eventually reach 28.75 cents per gallon while generating $600 million for infrastructure projects throughout the state.

Tennessee

The House and Senate approved a bill sponsored by Governor Bill Haslam, which would generate $350 million for the state’s highway fund, and boost road revenues for cities and counties. The gas tax will rise by 6 cents per gallon and the diesel tax by 10 cents on July 1. The bill also has several fee increases, including a $5 car registration increase and a $100 fee on electric car users

States Enacting Gas Taxes in 2016

New Jersey

In October 2016, Governor Chris Christie signed a bill that increased the gasoline tax to 23 cents per gallon. The bill marked the first tax hike of Christie’s tenure, and the first tax increase on gas since 1988. The law takes the second lowest gas tax rate from 14.5 cents per gallon, to 37.5 cents, the seventh highest. The law levies diesel users with a 15.9 cent per gallon tax increase, totaling more than 27 cents per gallon.

The bill will generate $1.23 billion annually to help finance an eight year, $16 billion transportation program. The legislation comes after the state’s Transportation Trust Fund, which helps pay for Garden State roads, bridges and railways, had no money to pay for new projects over the summer.

After Christie signed the bill in October, voters approved a November referendum to amend the state’s constitution to allocate the tax revenue to transportation projects. The law prevents lawmakers from reallocating the money to different projects.

States Enacting Gas Taxes in 2015

Georgia

The Georgia Legislature enacted the Transportation Act of 2015, increasing the excise gas tax by 7.5 cents per gallon, along with a four percent state sales tax, to 26 cents per gallon. These rates will then adjust to Consumer Price Index Every year. The money accrued from the tax will allocate to future state transportation projects. Additionally, the state will also collect a $5 per night hotel fee, as well as fees for heavy trucks and a $200 registration fee for electric cars. The law also eliminates a $5,000 tax credit for anyone who purchases an electric car. House Bill 170 also allows counties and municipalities to levy a 1 percent use tax on all motor fuels. The bill aims to collect $900 million a year to help fund transportation projects throughout the Peach State.

Idaho

Idaho’s gas tax increased 7 cents after state lawmakers approved a funding bill in April 2015 to help raise money for road repairs. The house bill increased the gas tax from 25 to 32 cents, to help raise more than $95 million a year. The accrued revenue is then split between local governments and state highway departments (60/40). Idaho also stipulates a $145 registration fee for an electric car, and a $75 fee for hybrid vehicles. However, a house bill introduced in 2017 will eliminate those fees if approved by the Governor.

Iowa

Governor Terry Branstad signed a bill in February 2015, which increased Iowa’s gas tax from 20 cents to 30 cents per gallon. The bipartisan initiative provides $215 million in annual funds for city, county and state roads. The gas tax increase received support from the Iowa Farm Bureau, the Chamber of Commerce, the trucking Industry, the Iowa State Association of Counties and the Iowa County Engineers Association. The gas tax legislation was the first fuel tax increase since 1989.

Kentucky

Kentucky lawmakers approved legislation pegging the gas tax to the average wholesale price of gas over a three-month span. However, a $1.46 drop in gas prices in 2015 created a significant shortfall in the Commonwealth’s transportation budget. As a result, the lower gas taxes helped create a $125 million gap for transportation projects in local municipalities and townships, as well as state highways. To ensure a steady stream of revenue, lawmakers approved a 26-cent minimum for the gas tax rate.

 

 

Nebraska

State legislators overrode a veto from the Governor to increase the state’s gas tax by cents per gallon, creating roughly $75 million a year in additional funding for transportation projects. The law says the gas rate will increase 1.5 cents every year for the next four years, through 2019. The State’s Transportation Innovation Act is estimated to raise $400 million. Nebraska’s gas tax has three components. This legislation will impact the fixed tax, which is set by state law at 12.3 cents per gallon in 2017. Meanwhile, the wholesale tax is pegged at the wholesale price and the variable tax adjusts every six months to meet the funding demands of previously approved state roads projects. The gas tax currently sits at 27.3 cents per gallon.

North Carolina

Governor Pat McCrory signed a bill reducing the fuel tax from 37.5 cents per gallon to 34 cents per gallon by 2016. In January 2017, the gas tax began using a formula that accounts for population, energy prices and the consumer price index to help adjust the rate. The reformed gas tax formula takes population and energy prices into account when calculating future gas tax increases in the years ahead. The first of those increased the rate to 34.3 cents per gallon.

South Dakota

Governor Dennis Daugaard signed legislation that increased the gas tax from 22 cents per gallon to 28 cents. The legislation also increases the excise tax on vehicle registration from three to four percent and increases license plate fees for noncommercial vehicles by 20 percent. The fuel tax hike will generate an estimated $40.5 million annually, while the excise tax increase will produce an additional $27 million to $30 million. Most of the revenue generated is allocated to state roads and local bridges. The new bill allows municipalities to levy their own taxes to repair roads in their jurisdiction.

Utah

State lawmakers approved legislation to increase the state’s gas tax by 5 cents per gallon from 24.5 cents. The legislation levies a 12 percent wholesale tax on fuel and pegs future increases to a formula that considers fuel prices and inflation. In March 2017, the state house voted to pass fuel tax increases of .6 cents per gallon beginning in 2019 and 1.2 cents a gallon in 2020, essentially reworking the formula established two years prior.

Washington

The Governor signed a 16-year transportation revenue package in August 2015, which increases the state’s gas tax to 44.5 cents per gallon. The legislation is part of the state’s $16 billion transportation project aimed at improving highways and roads, as well as non-highway projects like walkways, bike paths and transit systems. The two-part tax hike increased rates by an additional 4.9 cents a gallon, putting the total tax at 49.4 cents.

Capitol Commentary: the 2017 Omnibus Spending Package

Published: 5/3/17

Congressional negotiators curtailed President Donald Trump’s proposed defense buildup in the spending agreement to fund the government through September 30.

Trump had asked for a $30 billion budget adjustment for the Pentagon. Negotiators agreed to just about half of the supplemental spending request: about $15 billion, with the money going into the Pentagon’s war account, which is not subject to budget caps. But Congress would withhold $2.5 billion of that until the administration delivers a new plan to defeat Islamic State terrorists.

The legislation headed for a floor vote this week would provide money for 14 F/A-18E/F Super Hornets made by Boeing Co. That is 12 more of the fighter jets than the Defense Department initially requested, though it is only half of the 24 sought by Trump.

Negotiators treated some of Trump’s supplemental military request as duplicative because of overlap with decisions already made for the regular defense spending bill, H.R. 1301. For instance, lawmakers had already agreed to increase spending on Lockheed Martin Corp.’s F-35 Joint Strike Fighter, an additional destroyer ship made by General Dynamics Corp. and Huntington Ingalls Industries Inc., and more Sikorsky Black Hawk helicopters.

For the catch-all spending bill intended to keep the government fully operating after Friday, lawmakers directed the war funds mostly toward military readiness.

They allotted:

  • $2.9 billion for training and exercises;
  • $889 million for maintenance of aircraft, ships, and combat vehicles;
  • $859 million for repairs to facilities needed to improve readiness;
  • $1.6 billion for additional U.S. military operations against Islamic State, and
  • $626 million for additional training and equipping funding for coalition partners in operations against Islamic State.

Overall Funding

The omnibus spending measure would provide $592.7 billion for the Pentagon, including $516 billion in regular defense spending and $76.6 billion for Overseas Contingency Operations, or war funding. It would provide $108.4 billion for weapons and equipment procurement, or about $6.4 billion more than the $102 billion approved for fiscal 2016. The Navy would see the biggest bump — a $4.8 billion increase over last year to $48.8 billion.

Troops

To stave off planned reductions, the measure would fund an active-duty U.S. military force of 1,305,900 and a Guard and Reserve force of 813,200. To do that, appropriators added $1.6 billion. They also included a pay raise of 2.1 percent for the military after President Barack Obama’s administration had requested a 1.6 percent increase. The measure also would stipulate that there are sufficient funds for a civilian pay raise of 2.1 percent.

Aircraft

The measure would provide $1.1 billion for the purchase of 14 Boeing Super Hornet fighters, while Lockheed would receive $8.2 billion for 74 F-35 Joint Strike Fighters, 11 more than requested by the Pentagon. A Lockheed unit, Sikorsky, also would benefit from the measure, with $1.1 billion for 62 UH-60 Black Hawk helicopters.

Boeing also would benefit from $774 million for 52 re-manufactured AH-64 Apache attack helicopters and $262 million for seven new Apaches. The agreement also includes $187 million for 28 Lakota light utility helicopters made by Airbus Group.

Ships

The bill would provide $1.78 billion to accelerate the production of an additional LPD-17 amphibious ship made by Huntington Ingalls; would add $433 million for an additional DDG-51 destroyer made by General Dynamics and Huntington, and would add $475 million for a third Littoral Combat Ship not requested by the Navy. The LCS is built in two versions by teams led by Lockheed and Austal Ltd. In a nod to the Arctic — a strategic region where the U.S. competes with Russia– appropriators also included $150 million for advance procurement of materials for a Coast Guard ice breaker.

Cyber

The agreement includes $6.7 billion for cyberspace activities, or about $1 billion over last year, along with a new requirement that the Pentagon report to congressional committees “all offensive and significant defensive military operations” in cyberspace not later than 30 days after the end of each fiscal quarter.

Israel

The spending agreement would boost Israeli missile defense programs by $455 million over the Pentagon’s budget request, according to the House Appropriations Committee’s press release. The agreement would provide $600.7 million for Israeli missile defense programs, including $332 million for equipment procurement and $269 million in research and development.

John Zang Contributed to this report

Technology Briefing: Hacking Vehicles

By Danny Restivo (Posted 5/3/17)

A few months ago, we looked at the legislative developments surrounding driverless vehicles–something that nearly all 50 states are thinking about. As driverless vehicles become reality and states continue to grapple with regulatory challenges, more threats have emerged, including the ability for hackers to take control of someone’s car whether they’re driving it or the car drives itself.

Recent technological developments have allowed drivers greater accessibility and convenience than ever before. Whether it’s a WiFi hotspot, a mobile car starter application, a locator connected to your phone or a computer located under the hood that monitors maintenance, new technology has given consumers and technicians a level of sophistication that was once the work of science fiction.

Unfortunately, a greater degree of convenience means an increased level of vulnerability. In August 2015, two hackers compromised a tech reporters’ vehicle on the highway (The Wired reporter was working on a story about the dangers of car hacking and was aware of their attempts). From a remote location, the two hacked into the reporter’s 2014 Jeep Cherokee and controlled the vehicles steering and brakes from a computer more than 10 miles away. Ultimately, the reporter’s car ended up in a ditch (no one was injured). The story grabbed public attention and Fiat Chrysler recalled more than 1.4 million vehicles, including Ram, Dodge, Jeep and Chrysler vehicles. A similar organized hack occurred in June 2016 when a British security firm purchased a 2017 Mitsubishi Outlander and successfully disabled the vehicles alarm system. Nissan, Tesla and Chevy have all experienced similar breaches in their vehicles computer systems.

The hacks underscore a growing concern among regulators and legislators that automakers haven’t safely created communication systems. In light of these security vulnerabilities, the FBI, The Department of Transportation and the National Highway Traffic Safety Administration issued a public service announcement in March 2016.

“While not all hacking incidents may result in a risk to safety – such as an attacker taking control of a vehicle – it is important that consumers take appropriate steps to minimize risk,” the statement said. “Therefore, the FBI and NHTSA are warning the general public and manufacturers – of vehicles, vehicle components, and aftermarket devices – to maintain awareness of potential issues and cybersecurity threats related to connected vehicle technologies in modern vehicles.”

They added: “Vulnerabilities stemming from wireless communication, such as a cellular phone or tablet connected to the vehicle via USB, Bluetooth, or Wi-Fi, can put drivers at significant risk,” the statement also included several best practices for minimizing cybersecurity risks:

  • Ensure vehicle software is up to date
  • Be aware of making any modifications to vehicle software
  • Exercise discretion when connecting third party devices to a vehicle
  • Be aware of who has physical access to your vehicle

If you end up a victim of a car hack:

  • Check for outstanding vehicle recalls or vehicle software updates
  • Contact the manufacturer or authorized dealer
  • Contact the National Highway Transportation Safety Administration
  • Contact the FBI

The NHTSA and the FBI also suggested that automakers and auto companies should consider the full life cycle of their vehicles, while creating a rapid response and recovery system to help stem cybersecurity incidents. With the introduction of autonomous driving technology by companies like Tesla Motors, Uber, and others, yet another layer of vulnerability has complicated the issue. In September 2016, the NHTSA issued a framework for states to regulate self-driving cars, but critics fault it for its lack of focus on car hacking. A 2016 report from the Government Accountability Office, an independent watchdog organization, said the Department of Transportation had not taken enough steps to help prevent car hacking.

“Until [DOT] develops such a plan … the agency’s response efforts could be slowed as agency staff may not be able to quickly identify the appropriate actions to take,” the report stated.

Shortly after hackers showcased their ability on a 2014 Jeep Cherokee, Senators Ed Markey (D-Mass) and Richard Blumenthal (D-Conn) introduced the SPY Act of 2015 (Security and Privacy in Your Car).  The proposed legislation would have created a uniform regulatory standard for vehicle communication, while protecting a driver’s privacy data. The bill would also have created a “cyber dashboard” to inform the public of how well the vehicle protects drivers’ security and privacy.  While Markey and Blumenthal’s legislation did not make it out of committee during the 114th Congress, they recently reintroduced the SPY Act legislation in March as S. 680, along with a reintroduction of the Cybersecurity Standards for Aircraft to Improve Resilience (Cyber Air) Act (as S. 679 in the 115th Congress).

“This critical legislation will help protect the public against cybercriminals who exploit advances in technology like wireless-connected aircraft and self-driving cars,” said Blumenthal in a release following the reintroduction. “As technology rapidly advances, we must ensure that auto and airline industries protect their systems from cybersecurity attacks. Security and safety cannot be sacrificed as we achieve convenience and promise of wireless progress.”

Markey and Blumenthal cited a need to reintroduce the legislation because of an increased vulnerability in our transportation systems. After Uber unveiled plans to use driverless cars in Pittsburgh in September, the National Highway Transportation Safety Administration unveiled a federal framework for the technology to prosper, giving states a significant degree of sovereignty. However, some believe the NHTSA’s mandate didn’t go far enough in solving technological vulnerabilities in vehicles. Conversely, tech researchers and developers fear any federal regulatory framework will not ensure safety because cyber technology often outpaces the law, making hacks more accessible.

In a bipartisan effort, the House introduced a new piece of legislation to help safeguard drivers. Representatives Ted Lieu (D-CA) and Joe Wilson (R-SC) have cosponsored the Security and Privacy in Your Car Study Act of 2017. Compared to the senate bill, the House bill would only perform a study of best practices.

While federal lawmakers debate the best path forward, some states have taken their own steps to improve cybersecurity in vehicles. In Michigan, home of the American auto industry, state lawmakers have decided to use deterrence as a weapon against car hacking. In August, the state senate unanimously passed a law that would increase the penalty to life in prison if the interference of a vehicle’s computer system resulted in death. According to state law, there’s a 10-year sentence and $50,000 fine for anyone who tampers with the computer system of a driverless vehicle that results in injury.

Virginia Governor Terry McAuliffe announced a public-private commission in May 2015 to help protect state troopers against cyberattacks. Just prior to the announcement, The Old Dominion became the first state to create its own information and analysis sharing organization to help prevent against cyber-attacks. As part of its public safety initiative, researchers hacked into two Virginia State Trooper vehicles; a 2012 Chevrolet Impala and a 2013 Ford Taurus. Researchers from the University of Virginia and a few private tech companies, hacked into the vehicles control system before meddling with the gear shift, instrument panel, car locks, trunk and accessing the vehicles Bluetooth and key fob. While the organized hack was an attempt to raise awareness about the seriousness of car hacking, Governor McAuliffe continued a call for voluntary partnership between private and public entities in an effort to prevent car hacks.

While Michigan and Virginia pursue preventative action against car hacking, many state legislative bodies have tabled the issue. Every state has some sort of law on computer hacking, but none (besides Michigan) have laws that specifically deal with hacking vehicles. Meanwhile, New York University, University of Nevada, North Dakota State University, and others, have taken steps in research and development to create cybersecurity systems for self-driving cars. Furthermore, The Oak Ridge National Laboratory in Tennessee has begun experimenting with electronic control systems to help protect the federal government’s automotive fleet.

“Car hacking remains a significant issue for automakers and regulators, but it hasn’t spurned the federal government into action, just yet” says Brett Goldman, DMGS Manager of Special Projects. He adds that “it’s safe to say that at some point in the future, car hacking will receive greater public scrutiny, but whether that comes as an issue of legislative and regulatory foresight or as a reactionary measure to the unthinkable remains to be seen.”

 

The Week Ahead: In Washington (4/17)

Supreme Court Justice Neil Gorsuch didn’t have much time to get up to speed on his new job.

Only a week after being sworn in, Gorsuch will take the bench for the first time today, filling the space next to Justice Sonia Sotomayor and hearing arguments in three cases, with another four scheduled to follow later in the week. They include a clash tomorrow over the power of the Securities and Exchange Commission to recoup illegal profits and arguments Wednesday in a closely watched church-state dispute.

The flurry of arguments will offer Gorsuch a fast introduction to his new responsibilities and give the public its first glimpse at how he will conduct himself on the court. But preparing for arguments shouldn’t be too difficult for Gorsuch, given his decade on a federal appeals court in Denver, says Alexander “Sasha” Volokh, a professor at Emory University School of Law who served as a law clerk for Sandra Day O’Connor and for Samuel Alito during his first term.

More daunting, perhaps, will be the Supreme Court’s unique rhythms and rituals, including the private conferences the justices hold to discuss cases each week when they are in session. The other eight justices held one last Thursday and were scheduled to consider more than 200 requests for a hearing.

Taxes

Since plans to overhaul Obamacare stalled last month, attention has turned to plans to rewrite the U.S. tax code. A key component of those discussions is a so-called “border-adjusted tax.

But while you might want to brace yourself for political arguments about the “reciprocal tax,” the “matching tax” or the “mirror tax,” you won’t be hearing much about the border tax, if Trump has anything to say about it.

Trump made clear last week that he’s not fond of that name — nor the controversy that has sprung up around the BAT, a key feature of House Speaker Paul Ryan’s tax plan. Retailers, automakers and oil refiners that rely on imported materials have all complained that Ryan’s proposal to tax U.S. companies’ domestic sales and imports while exempting their exports would mean higher prices for consumer goods.

Economists and tax experts who parsed Trump’s remarks last week say the president appeared to be calling for import tariffs — that is, taxes levied on specific goods or countries at varying rates. In describing his vision, Trump called for taxing imports from other countries at the same rates those countries impose on U.S. products. “You say, ‘OK, whatever you charge, we’re charging,”’ Trump said. Left unsaid was how or whether Trump’s plan would tax U.S. companies’ exports.

 

John Zang contributed to this post. 

Legislative Insight: The American Health Care Act (AHCA)

Posted: 4/2/17

After failing to muster 215 votes—with no support from Democrats—House Republican leaders pulled the American Health Care Act from a vote last Friday (March 24th). The decision to abstain comes after President Donald Trump and House Speaker Paul Ryan (R-WI) placated both wings of their party. While Trump and Ryan offered incentives to staunchly conservative representatives, they alienated their moderate colleagues.charles_w-_dent2c_official_photo_portrait2c_color

“After careful deliberation, I cannot support the bill and will oppose it,” said Rep. Charlie Dent, (R-PA) in a statement on Thursday.  “I believe this bill, in its current form, will lead to the loss of coverage and make insurance unaffordable for too many Americans, particularly for low-to-moderate income and older individuals.  We have an important opportunity to enact reforms that will result in real health care transformation–bringing down costs and improving health outcomes. This legislation misses the mark.”

Dent’s statement echoes other GOP centrists wary of the AHCA’s impact, as predicted by the Congressional Budget Office. Last week, The CBO and the Joint Committee on Taxation released the much-anticipated score of the American Health Care Act,

The scores assessment included several notable statistics:

  • Fourteen million people would be without health insurance in 2018 under the new law, compared to the Affordable Care Act. In 2020, that number would increase to 21 million before rising to 24 million in 2026;
  • AHCA would reduce the federal budget by $337 billion over 2017-2026;
  • The report estimates that premiums would jump 15 to 20 percent in 2018-2019 for single policyholders because of the individual mandate repeal. After 2020, a decrease in premiums will vary based on age and income;
  • Several Medicaid provisions would decrease spending by $880 billion over the next decade. By 2026, the CBO estimates that Medicaid spending would be about 25 percent under the current ACA.

The CBO’s assessment stems from several AHCA provisions, including:

  • Removal of the individual mandate. Instead of a penalty, the AHCA will implement a 30 percent surcharge on premiums of a year if previous coverage is dropped.
  • The AHCA issues tax credits based on age and income, whereas the ACA also included geography and cost of living in their subsidy assessment. Furthermore, AHCA caps refunds at $4,000 for those 60 and older, while a younger person with the same income would receive $2,000.
  • Under ACA, the Federal government has a matching program. Under the AHCA, the Federal Government would fund Medicaid by a per capita amount beginning in 2020.

Among the most debated items in the CBO’s report, was the overhaul of Medicaid expansion. Under the Affordable Care, Medicaid coverage extended to people at 138 percent of the federal poverty level. Prior to Obamacare, the federal and state government’s paid 50/50 in Medicaid costs. With the expansion (32 states accepted the Medicaid expansion), the federal government covered a significant portion of Medicaid expansion to cover low-income Americans. The American Health Care Act does not extend Medicaid coverage to new individuals between 100 and 138 percent at the federal poverty level, but would allow those already on the expansion to remain under a grandfathered clause. Furthermore, the AHCA creates a per capita formula for federal Medicaid funding. By 2020, the CBO estimates that 14 million fewer people will be on Medicaid. As a result, a larger tax burden for Medicaid would shift to the State’s covering Medicaid expansion. West Virginia, Nevada, Ohio, Arizona, New Mexico and Kentucky—states with high portions of residents at 100 to 138 percent of the poverty level—would experience the greatest impact.obamacare_replacement_brainstorming_session

In lieu of limited Medicaid funding, the AHCA would have provided age-based tax credits instead of ACA subsidies based on income, regional insurance costs and age. While the ACA did not cap subsidies, AHCA maxes tax credits at $4,000 for anyone older than 60 and making less than $75,000. Essentially, older, lower income people living in a high cost region will see a cap on the amount of money to help them purchase insurance under AHCA. Conversely, younger people with higher incomes will see an increased tax credit under AHCA compared to ACA.

Projected Annual Premium Tax Credit available in the Individual Market under the Affordable Care Act and the American Health Care Act, 2020
Income (2020 FPL) Age Affordable Care Act American Health Care Act
Reno, NV US Average Mobile, AL Reno, NV US Average Mobile, AL
$20,000 (160% FPL) 27 $2,899 $3,225 $4,522 $2,000 $2,000 $2,000
40 $3,745 $4,143 $5,725 $3,000 $3,000 $3,000
60 $9,030 $9,874 $13,235 $4,000 $4,000 $4,000
$40,000 (320% FPL) 27 $0 $103 $1,400 $2,000 $2,000 $2,000
40 $623 $1,021 $2,603 $3,000 $3,000 $3,000
60 $5,908 $6,752 $10,113 $4,000 $4,000 $4,000
$75,000 (600% FPL) 27 $0 $0 $0 $2,000 $2,000 $2,000
40 $0 $0 $0 $3,000 $3,000 $3,000
60 $0 $0 $0 $4,000 $4,000 $4,000
$100,000 (800% FPL) 27 $0 $0 $0 $0 $0 $0
40 $0 $0 $0 $500 $500 $500
60 $0 $0 $0 $1,500 $1,500 $1,500
Source: Kaiser Family Foundation analysis. Notes: In the 2017 ACA exchange markets, premiums in Reno, NV and Mobile, AL are approximates

 

AHCA’s Impact on New Jersey

The Garden State was recently ranked eighth in the nation in Medicaid usage, while also having the seventh lowest premium raises as a result of ACA, according to various reports. With AHCA’s proposal to slash funding and convert Medicaid dollars into block grants, New Jersey—which has a fifth of its residents covered by Medicaid—would have dropped a million people from coverage.

If New Jersey were to maintain the current Medicaid eligibility levels, the state would be on the hook for an additional $8.8 billion over the next decade with reduced Federal assistance. If the ACA was repealed, New Jersey would have to contribute about $2.1 billion annually instead of its current $461 million.

According to New Jersey Policy Perspective, half a million New Jersey residents would lose coverage in the next three years under AHCA, with the largest percentage increases occurring in Republican held congressional districts.

While the House did not hold an official vote, three Garden State Congressional Republicans took note of the bills potential impact and voiced their opposition. In the end, only two of New Jersey’s five Republican congressmen supported AHCA, while all the Democrats opposed the bill.

frank_lobiondo2c_official_portrait2c_c112th_congressRegrettably, the current healthcare proposal is not better for South Jersey,” Rep. Frank LoBiondo (NJ-2nd) said in a statement before the vote. LoBiondo’s district would haveexperienced a 77-percent increase in uninsured if AHCA was passed. “Simply put, this bill does not meet the standards of what was promised; it is not as good as or better than we currently have. Accordingly, I will vote “no” on this healthcare plan.”

Rep. Leonard Lance (NJ-7th) also said he would vote against AHCA days prior to a scheduled vote.

“The legislation congress was considering this week missed that mark and did not meet my goals for an Obamacare replacement plan: greater access for the American people, better options for all patients and lower costs across the healthcare market,” Lance said in a statement. “I am hopeful future legislation will achieve these goals and I will work with President Trump, Speaker Ryan and all those who wish to improve the healthcare system in this country.”

Rep. Chris Smith, New Jersey’s 4th district, also voiced opposition. Meanwhile, GOP congressmen Rep. Tom MacArthur (NJ-3rd) and Rep. Rodney Frelinghuysen (NJ-11th) made statements in support of AHCA.

“This bill was not perfect—no bill is—but it was a dramatic improvement from where it started,” said MacArthur after Ryan withdrew the bill from the House. MacArthur’s support of AHCA came in lieu of a 94-percent increase in uninsured within his district. “It didn’t have enough votes to pass but I stand by my efforts to improve it. The only way we’re going to repair our broken healthcare system is if we work together to fix the problem.”

Highlights from the Congressional Debate Surrounding AHCA

us_congress_02After the Congressional Budget office released its findings, both Democrats and Republicans began publicly denouncing the House GOP’s healthcare mandate. House Minority leader Nancy Pelosi (D-CA) appeared alongside Senate Minority leaders Chuck Schumer (D-NY) for a joint statement following the report’s release:

“This is – to take 20 million off of their coverage, and as they do so, they are implementing the biggest transfer of wealth in our history – $600 billion dollars going from working families to the richest corporations in our country,” said Pelosi.  In terms of insurance coverage, it’s immoral.  In terms of giving money to the rich at the expense of working families, it is indecent and it is wrong.”

While the backlash from congressional Democratic leadership seemed predictable, right-wing members of the Republican House also criticized the bill.

“…We didn’t tell the American people we were going to repeal Obamacare but keep some of the taxes in there,” said Rep. Jim Jordan (R-Ohio), chairman of the House Freedom Caucus, during a Fox News Sunday interview with Chris Wallace, a day before the CBO score was released. “We didn’t tell them we were going to repeal Obamacare and get rid of the mandate but yet bring back this 30 percent penalty that’s in the bill.  We didn’t tell them we were going to have this insurance subsidy in the bill either.  So, let’s do what we said.”

Meanwhile, at the moderate end of the GOP spectrum, Rep. Illena Ros-Lehtinen, located in Miami, announced her intention to vote against the AHCA. Citing her elderly and poor constituents, Ros-Lehtinen said in a statement released on March 14: “The bill’s consequences for South Florida are clear: too many of my constituents will lose insurance and there will be less funds to help the poor and elderly with their healthcare.” She added, “we should work together to write a bipartisan bill that works for our community and our nation without hurting the elderly and disadvantaged among us.”

Jordan and Ros-Lehtinen’s comments highlight the challenges AHCA architects Ryan (R-WI) and House Majority Leader Rep. Kevin McCarthy (R-CA) face in getting the bill through congress. The House Speaker also had to work with the Trump administration which promised “insurance for everybody” on the campaign trail, and doubled-down on it following his victory in November. Furthermore, as one of the bills architects, Ryan must pass the bill through the budget reconciliation process. This parliamentary maneuver circumvents a filibuster by Democrats in the Senate with only 50 votes needed. However, reconciliation means the bill must relate to the budget, and can’t target provisions in ACA. The bill also had comply with the “Byrd Rule”in the Senate. Named after the former West Virginian Senator Robert Byrd, it stipulates that a reconciliation measure is prohibited from considering “extraneous matters,” as determined by the Senate parliamentarian.

In an effort to woo both moderate and conservative GOP votes, House leadership amended several aspects of the bill on Monday night. Among the revisions aimed at centrists included $85 billion in funding for tax credits to help Americans between 50 and 64 years old deal with rising premiums. The GOP leadership also deleted a provision that would have allowed consumers to place their tax credit in a health savings accounts, which could then be used for an abortion. Other revisions included work requirement for able-bodied Medicaid recipients, and state options for converting Medicaid programs into block grants.

Rep. Mark Meadows (R-NC), the House Freedom Caucus Chairman, told reporters the revisions weren’t enough to give Republicans the required votes to pass the House. With 27 members, the House Freedom Caucus remains a major barrier to the GOP’s healthcare reform plan. The Freedom Caucus maintains that it will not vote for a plan that mandates services a healthcare provider must carry. The caucus believes this stipulation prevents costs from coming down, but it can’t be changed under budget reconciliation rules.

On Wednesday, Rep. Lou Barletta (R-PA) announced he would vote for the bill following a meeting with Trump and Ryan. His flip comes after receiving a guarantee to have a vote on his bill that bans illegal immigrants from receiving tax credits.

“The president gave his full support to legislation I will introduce to deny health care tax credits to illegal immigrants, and the speaker promised to bring the bill to the House floor for a vote,” Barletta said in a statement. “Because my concerns were met, I will vote for the bill with the understanding that my bill will receive full consideration on the House floor next month.”

While the House bill ultimately failed, other options in the Senate remain. Senator Bill Cassidy (R-LA) has introduced a bill known as the Patient Freedom Act. The bill gives states three options: 1) Keep the ACA intact 2) Create a new state alternative 3) Design an alternative solution without federal assistance. The Senate resolution was introduced in January before it was sent to the committee on Finance. It includes five cosponsors; Lindsey Graham (R-SC), Mike Rounds (R-SD), Shelly Capito (R-WV), Johnny Isakson (R-GA) and Susan Collins (R-ME).

“Our plan represents a growing coalescence of Republican ideas on health care while returning power to states and fulfilling President Trump’s pledge to bring health care coverage for all,” said Cassidy in a statement following the bills introduction.

Following the release of the AHCA CBO score, Cassidy told the Washington Post the score was “eye-popping”

“President Trump said that he wants as many people covered as under Obamacare,” Cassidy said Monday. “He said that health care should be affordable. If there’s 14 million people losing insurance, of course it’s concerning.

While the bill replaces Obamacare, it mirrors the ACA’s taxes, benefits and subsidies, as well as the individual mandate and the stipulations on pre-existing conditions. Cassidy’s bill is the best attempt at reaching out to moderates from both parties, but most Democrats have opposed any repeal of Obamacare.

At the other end of the GOP Spectrum, Senator Rand Paul’s (R-KY) Obamacare Replacement Bill represents the most conservative option put forth by a Senate Republicans. Paul’s plan, which has a single co-sponsorship from Sen. Pat Toomey (R-PA) would strip away the ACA’s regulations and requirements, including the individual mandate and a restriction on inexpensive healthcare plans. The bill also gives states more control of their Medicaid programs but does not provide detail on the entitlements expansion. On February 15, Rep. Marshall Sanford (R-SC) introduced companion legislation, which included six House GOP cosponsors.

The bill mirrors a similar resolution that Paul attempted to pass in 2015.

While GOP lawmakers debate the best path forward, several organizations have voiced their support and opposition:

Key Organizations against AHCA

  • AARP
  • The American Hospital Association
  • The Federation of American Hospitals
  • The American Medical Association
  • The American Nurses Associations
  • Heritage Action
  • Club for Growth
  • Americans for Prosperity

Key Organizations favoring AHCA

  • Americans for Tax Reform
  • Association for Mature American Citizens
  • Council for Citizens Against Government Waste
  • Log Cabin Republicans
  • Independent Women’s Voice
  • Institute for Liberty
  • Market Institute
  • Small Business and Entrepreneurship Counsel

Following the bill’s withdrawal, Ryan spoke to the media about the future of the Affordable Care Act:

“Obamacare is the law, and it’s going to remain the law of the land until it is replaced,” Ryan said. “We did not have quite the votes to replace this law, and so, we’re going to be living with Obamacare for the foreseeable future.”

Danny Restivo Contributed To This Report

Legislative Update: Stem Cell Research

By Danny Restivo 3/30/17

Since the 1950s, doctors and other medical professionals had used stem cells extracted from bone marrow to help treat Leukemia patients. As technology evolved, scientists began to see human embryos as a prime source for developing healthy stem cells. However, with Roe vs. Wade, as well as the first “test tube baby,” the American public began raising questions on ethical grounds. In 1996, Congress passed the Dickey-Wicker Amendment, which prohibits 320px-human_embryonic_stem_cells_only_afederal funding for research using human embryos. Four years later, the NIH released guidelines on the use of embryonic stem cells at the request of President George W. Bush. A year later the president issued restrictions on federal funding for stem cell research on human embryos.  In 2005 and 2007, congress sent two different bi-partisan bills to Bush’s desk, which would overturn the public funding ban on stem cell research. However, each bill was vetoed and there weren’t enough votes to override the president’s decision.

In 2009, President Barrack Obama removed some funding restrictions on embryonic stem cell research with the executive order, “Removing Barriers to Responsible Scientific Research Involving Human Stem Cells.” For the next four years, opponents of embryonic stem cell research took their case to court. In 2013, the Supreme Court upheld a lower court’s ruling in Sherley v. Sebelius, which dismissed a lawsuit against federal funding for embryonic stem cell research.

In December, just a month before leaving office, President Obama signed the 21st Century Cures Act. The bill includes $4.8 billion in funding to the NIH for the advancement of biomedical science, including regenerative treatments like stem cell therapy. The Cures Act does permit the FDA to accelerate the stem cell treatment approval process. However, supporters of Stem Cell treatments believe it doesn’t go far enough in making stem cell clinics fall within guidelines.

While the federal government has revised its policy on embryonic stem cell research, several states have created policies and programs that support stem cell research and other regenerative therapies. Many of these institutions were created in the wake of President Bush’s order to limit federal funding for embryonic stem cell research. With federal funding approved in 2009, as well as more potential money from the Cures Act, state lawmakers may question how much state money allocates to these institutions.

State Initiatives

Map of the United States

California—The California Institute for Regenerative Medicine

In 2004, California voters approved the California Stem Cell Research and Cures, which gave nearly $3 billion dollars over ten years to stem cell research clinics. The bill was a result of the federal government’s attempt to limit funding for stem cell research, while also showcasing California’s aim to become a hub for medical research. Proposition 71 helped create the California Institute for Regenerative Medicine, which was supported by 59 percent of the electorate in 2004. Thirteen years later, CIRM has elicited mixed public opinion. While proponents point to several cases where CIRM research has directly saved lives, opponents cite a lack of progress in comparison to NIH stem cell trials (while President Bush’s restrictions targeted embryonic stem cell research, the NIH continued to fund trials in 2006). In a 10-year span, NIH fully or partly funded 571 trials with $13.4 billion. Conversely, CIRM funded 50 trials with $2.2 billion. Opponents also site a lack of oversight, as well as a focus on infrastructure investment compared to research trials. In 2020, the CIRM will run out of money and it’s unclear whether they will ask voters for public financing, or seek funding through foundations or donations.

Connecticut—Connecticut Stem Cell Research Program

In 2005, state lawmakers provided $100 million in funding for stem-cell research projects over a 10-year period. In October 2014, the Connecticut Department of Health transferred its Stem cell research program to Connecticut Innovations, the state’s venture capital fund that matches public and private partnerships. Under Connecticut Innovations, the Stem Cell Research Program changed its name to the Regenerative Medicine Research Fund. They have collaborated with Yale, UConn and other private entities throughout the region.

Maryland—Maryland Technology Development Corporation

Republican Governor Robert Ehrlich signed the Stem Cell Research Act in 2006, which helped create the Maryland Stem Cell Research Fund. Similar to Connecticut, the fund aims to provide grants and loans to private and public clinics performing stem cell research. While the Maryland Technological Development Corporation (TEDCO) administers the funds, the Maryland Stem Cell Research Commission Fund, an independent scientific peer review committee, directs funding. Since 2006, more than $130 million and 375 research grants have been committed. In May 2016, TEDCO approved the commission’s recommendation for 26 new proposals, totaling more than $8.4 million. In February, MSCRF—along with John Hopkins Medicine and BioCardia, Inc.—announced a patient suffering from a debilitating heart condition had moved into the final trial stage of treatment following stem cell treatment.

Minnesota—Regenerative Medicine Minnesota

In 2014, the Minnesota State Legislature approved a bill that allocates $50 million over a 10-year period to support regenerative medical research. The state also wants leverage the economic potential of regenerative medicine, and created a funding category titled “Bio-business Development.” In 2016, RMM has issued $1.17 million in bio-business grants. The fund also supports research, patient care and education.

New Jersey—Stem Cell Institute of New Jersey

In 2007, voters rejected a proposal to fund a $450 million bond referendum to support stem cell research in the Garden State. Although the constituency had rejected the proposal, the assembly had already authorized the state to borrow up $270 million to cover construction costs for five stem cell labs across the state. When voters went to the poll to reject the initiative, the state had already incurred more than $2 million in planning expenses and broke ground. Nonetheless, Governor John Corzine (D) pledged to continue with the plan, but he put the project on hold six months later. In 2014, the Human Genetics Institute of New Jersey launched their own Stem Cell Program, which was labeled as the institute’s successor.

New York—The New York State Stem Cell Science

The New York Stem Cell Science Program (NYSTEM) launched in 2007 after the lawmakers approved an 11-year, $600 million investment in stem cell research. Since 2007, NYSTEM has issued 24 requests for applications, and made 323 awards totaling $354 million to 35 different institutions. The NYSTEM program aims to further the agenda of the Empire State Stem Cell Board, which serves as an accelerator for scientific knowledge about stem cell biology. In January 2015, Governor Andrew Cuomo (D) announced a $36 million grant for three stem cell research groups. More than $15 million of that grant was earmarked for Weill Cornell Medical College to help develop a cure for Sickle-Cell Anemia by using patients’ own stem cells.

Ohio—The National Center for Regenerative Medicine

Formed in 2003 through funding from an Ohio economic agency, the National Center for Regenerative Medicine includes partnership among Case Western Reserve University, The Cleveland Clinic, University Hospitals Case Medical Center and the Ohio State University. The NCRM focuses on regenerative medicine and stem cell research, cellular manufacturing and clinical trials for cellular therapeutics. In additions, the NCRM has focused on heart disease, cancer, genetic disorders, neurodegernative disease using non-embryonic stem cells. Ultimately, the center aims to use its research to help replace diseased tissues and organs.

Texas—The Institute for Regenerative Medicine at Texas A&M

Established in 2008, the Texas A&M Institute for Regenerative Medicine is a joint venture between Baylor University, Baylor Scott & White Hospital, and the Temple Bioscience District. With funding from the NIH, as well as Texas’s Emerging Tech Fund, the Texas IRM facilitates collaboration between scientists and Central Texas clinicians in an effort to create therapies for degenerative therapies. The IRM also provides human adult stem cells, rat stem cells, and mouse stem cells to academic researchers worldwide.