Democrats to Propose Tax Code Changes for Job Creation

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By Tyrone Richardson

Congressional Democrats are starting to give more attention to legislation that would tinker with the tax code in an effort to entice employers to invest in workforce development.

The legislation, part of the party’s new “A Better Deal” plan, would offer tax incentives to employers to hire workers and train them in new skills. It’s part of an effort by Democrats to have a voice in the Republican-controlled Congress, Democrats and political science professors told Bloomberg BNA.

“It makes smart political sense if they want to get traction on a policy change” to do it with the same approach as the Republicans are taking with their agenda, Sarah Binder, a political science professor at George Washington University, told Bloomberg BNA.

Republicans plan to push their tax reform agenda when lawmakers return from their August recess. The GOP is already in the midst of rolling out a series of bills that would seek to spur job development through more apprenticeships and cutting regulations.

Congressional Democrats have turned to the tax code to try to push workforce policy changes done in the past, including in a string of laws intended to spur job growth during the recent recession. The exact legislation for this Congress isn’t clear. It’s also not clear how many Democrats would support using incentives to secure measures such as paid sick and family leave for workers or continue to push legislation requiring employers to offer those benefits.

The “better deal” campaign is centered around employment issues, focusing on “good-paying jobs,” lawmakers said late last month. They cited Labor Department data showing that some 5 million workers have been forced to take part-time work because they can’t find full-time jobs.

In addition to tax incentives, the party is focusing on apprenticeships and infrastructure programs in a plan to create 10 million new jobs within five years. Other focus areas include contesting big corporate mergers and lowering prescription drug prices.

The new Democratic effort comes on the heels of the November election in which President Donald Trump won some traditionally Democratic-leaning states by appealing to working-class voters.

Democrats Continue Focus on Workforce Issues

Democrats in this Congress have already either introduced or backed legislation that would alter the tax code for workplace issues such as paid leave and apprenticeships.

The party’s approach of pushing for tax credits for “targeted” issues is different than that of GOP lawmakers, who are generally seeking a tax cut for employers, reducing their overall costs to entice them to invest in the workforce, Caroline Bruckner, a professor and managing director of the Kogod Tax Policy Center at American University’s Kogod School of Business, told Bloomberg BNA Aug. 16.

“Democrats are coming around to the idea that the corporate tax rate is high and they want to use tax incentives,” Bruckner said. “Instead of a big tax cut, they’re willing to give a tax break if you use money to upgrade skills of a workforce or a training program.”

Specific Legislation Remains Unclear

Democrats also are proposing separate bills without tax incentives to address issues such as paid leave, and raising the national minimum wage rate. It wasn’t immediately clear this week how exactly Congressional leadership will address all pieces of the Democratic legislative agenda.

As for the employer-based tax incentives for hiring and training, an aide for House Minority Leader Nancy Pelosi (D-Calif.) referred Bloomberg BNA to the party’s announcement of the new plan and slogan late last month.

“To ensure the credit benefits the employee, the credit would only be paid in full if the employee remains in full-time employment at a good wage for a number of years after completing the training program,” according to the announcement. “The credit could only be used to defray the costs of new investments, above what the business already spends, on training.”

Republicans, however, are touting their own agenda. “We believe our plan for comprehensive tax reform is the best way to benefit all workers and businesses,” Doug Andres, a spokesman for House Speaker Paul Ryan (R-Wis.), told Bloomberg BNA Aug. 17.

Republican National Committee spokesman Michael Ahrens took a similar position.

“All we’ve seen from Democrats so far is obstruction and empty political rhetoric, but if they’re actually interested in helping create jobs, they should come to the table and work with President Trump and Republicans on tax reform,” Ahrens told Bloomberg BNA Aug. 17.

Tax Code Changes Used in the Past

Proposed changes to the tax code have been used in past efforts to move other social and economic policies. This Congress is no different, Binder said.

“Given the difficulty of legislating major social change in a period of rising polarization, Democrats long ago discovered that tweaking the tax code was a much more politically feasible route to extending social welfare benefits,” Binder said.

An example includes Great Recession-era legislation like the Hiring Incentives to Restore Employment Act. HIRE was signed into law by President Barack Obama in 2010, provided payroll tax breaks for businesses to hire unemployed workers.

The party’s new slogan helps bring workforce issues to the forefront, Chris MacKenzie, spokesman for Rep. Terri Sewell (D-Ala.) told Bloomberg BNA.

Sewell, for example, earlier this year reintroduced the Workforce Development Tax Credit Act ( H.R. 1190). The measure would provide tax credits for businesses that offer apprenticeship programs. The bill is co-sponsored by 11 Democrats and Rep. Bradley Byrne (R-Ala.), chairman of the Education and the Workforce committee’s Workforce Protections Subcommittee.

Sewell earlier this month marked the first Democrat to co-sponsored a House version of the Strong Families Act (S. 344, H.R. 3595), which would offer tax incentives to employers that provide paid family and medical leave.

“I’m a strong believer that our workforce needs to be family friendly and that our tax policies should incentivize the behavior we want to see,” Sewell said in a written statement.

To contact the reporter on this story: Tyrone Richardson in Washington at trichardson@bna.com

To contact the editors responsible for this story: Peggy Aulino at maulino@bna.com; Terence Hyland at thyland@bna.com; Chris Opfer at copfer@bna.com

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