
Vol. 2 No. 9 April 30, 2001
by Guest Blogger, 7/17/2002
In This Issue
May 10 Rally To Preserve The Estate Tax And Oppose The Bush Tax Cut
Wherefore Our Tax Cut?
Ways and Means Approves Another Tax Bill
Charitable Choice Hearings
Reports Urge Foundations To Increase Level Of Grantmaking
Proposals To Eliminate Tax On Foundations Could Remove Disincentive For Increased Grantmaking
IRS Says It's Still Considering Guidance On Internet Advocacy
Is Bush Turning Green?
OECD Study: Right-To-Know & Precautionary Principle
Arsenic Right-to-Know
Lieberman to Unveil E-Gov Act of 2001
Final Rule Issued on Section 508 Federal Acquisition Regulations
Tech Help: Administrative Advocacy
To the Editors:
Corrections
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SIDE BAR: Taxes: Last Chance to Sign Estate Tax Petition Nonprof Sector: Environmental RTK: Poor Environmental Polling for Bush; Environmental Lead RTK Rule
May 10 Rally To Preserve The Estate Tax And Oppose The Bush Tax Cut
Nonprofits to Preserve the Estate Tax, a coalition chaired by OMB Watch and Responsible Wealth, which is staffed by United for a Fair Economy are sponsoring a noon rally at the Capitol on Thursday, May 10. Confirmed speakers are Bill Gates, Sr.; Marian Wright Edelman, Children's Defense Fund; a business owner; and a farmer from Iowa. We are lining up more speakers to show the broad base of support for preserving the estate tax, which serves a valuable role in preventing huge concentrations of wealth from being passed, untaxed, from generation to generation; is a substantial source of federal and state revenue for important programs that serve low- and middle-income people; and serves as a vital incentive for increased charitable giving to support the work that nonprofits do.
Everyone is encouraged to attend. Following the 12 P.M. - 1 P.M. rally, those who wish to participate in lobby visits are invited to attend a briefing and be paired up with others from Responsible Wealth and/or Nonprofits to Preserve the Estate Tax for lobby visits with Senators and staffers from 2 P.M. through 5 P.M. No experience is necessary -- we'll make sure that you have materials and all you need to address concerns about efforts to repeal the estate tax.
If you plan to attend, RSVP by e-mailing Cate Paskoff at paskoffc@ombwatch.org.
From 4:30 P.M. - 6:30 P.M., a reception with the Rev. Jim Wallis and others will be held at St Mark's Episcopal Church (118 Third Street, SE, Washington, DC).
This is an opportunity to express your opposition to repeal of the estate tax, as well as to the larger tax cuts as a whole. For more information, and to receive exact location and schedule information, please call or email Cate Paskoff (paskoffc@ombwatch.org) or Ellen Taylor (taylore@ombwatch.org) at OMB Watch at 202/234-8494.
You can also voice your personal concern by signing the MoveOn.org petition opposing repeal of the estate tax. Nearly 20,000 have already signed. The petition will be released at the rally.
A number of charities and foundations are now speaking out against repeal of the estate tax. The Council for Advancement and Support of Education (CASE) sent a letter to the Senate opposing repeal. Environmental groups and religious leaders are doing the same. And at the annual Council on Foundations meeting, which is occurring in Philadelphia this week, the issue was raised from the floor by Rockefeller Brothers Fund President Stephen Heintz. A number of foundations expressed concern, which is reflected in the nearly 300 signatures from those in the donor community opposing repeal. (See the NCRP/UFE letter.)
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Wherefore Our Tax Cut?
Maybe we should start a poll. Will there be a tax cut enacted by Memorial Day? If so, how big will it be? Those two questions seem to be the main discussion among budget watchers these days.
The answer to the first question hinges on whether Congress can finish a budget resolution. The House and Senate have been in a conference to resolve spending and tax differences. While some are expecting them to complete their work by mid-week, it may not be so easy.
On April 18, Sens. James Jeffords (R-VT), Lincoln Chafee (R-RI), Ben Nelson (D-NE) and John Breaux (D-LA) sent a letter to Pete Domenici (R-NM) and Kent Conrad (D-ND), the chair and ranking member of the Budget Committee, to urge that conferees adopt the $1.18 trillion tax cut passed by the Senate (plus an $85 billion immediate tax rebate). These Senators may hold the key to getting a budget resolution passed in the Senate. Thus, their letter sends a strong signal.
Budget conferees ran into a roadblock on reaching a consensus on the tax cut size. The Bush Administration and the House leadership still wanted a $1.6 trillion 10-year tax cut. The Senate leadership, because of Republican defections, knows that it cannot go much above the $1.2 trillion cut. Everyone thought a deal was struck when the Administration agreed to a $1.4 trillion tax cut at the end of last week, which included $1.34 trillion in cuts over the next ten years and an immediate $60 billion rebate. However, the Breaux-led group felt that was still too much of a tax cut. They would agree to a small increase from the Senate-passed version -- a $1.25 trillion tax cut over the next 10 years plus an $85 billion immediate tax rebate.
The same problem exists for the spending side of the budget resolution. The Bush Administration and conservatives want to hold spending to a 4% increase over the current year, not counting inflation adjustments. However, the Senate budget resolution calls for an 8% increase, recognizing the need for more money for such things as health care for the uninsured, prescription drugs for the elderly, and education programs. Splitting the difference may not work since some of the House conservatives could bolt on the final conference agreement, making it difficult to pass. Moreover, some House conservatives may argue that spending has to be held at 4% if they are going to give in to the Senate on the size of the tax cut.
While the discretionary spending limits in the budget resolution are important, it is not uncommon for the limits to be exceeded when spending bills are completed. However, the tax cut size will be critical to determining what happens on the tax cut. That is because the budget resolution lays out reconciliation instructions, telling the tax writing committee (and other committees) what to do on taxes and mandatory spending. Reconciliation provides for special rules, such as limits on amendments and filibusters in the Senate. (If there are 60 votes in the Senate, the tax law becomes permanent. Otherwise the tax initiative sunsets.) Given the 50-50 party split in the Senate, it will be necessary to use the reconciliation procedures to get virtually any tax bill done.
The Senate budget resolution calls for two reconciliation bills: one by May 18 and the other by September 14. While the conferees could change the dates, the Senate Finance Committee will need a completed budget resolution to move tax cut legislation under the special reconciliation rules. If the budget resolution dies, then it becomes significantly harder -- if not impossible -- to pass large tax cuts in the Senate.
Even if the budget resolution passes this week, there will be huge pressure on the Finance Committee to craft a bill by May 18 (or whatever the reconciliation date turns out to be) that fits within the size of the tax cut permitted and still has all that the President wants plus fixes the Alternative Minimum Tax, which needs to be modified to ensure that average taxpayers don't fall under the AMT. One way to do all that would be to slowly phase in the tax cuts. In that way, the real cost would fall outside the ten-year estimates. This would probably anger a number of Democrats and moderate Republicans such as Jeffords, Chafee and Specter, making it difficult to pass. Another is to not give Bush everything he asked for. The question then becomes what will the Finance Committee propose for tax cuts.
Needless to say, given that the House has passed nearly everything that Bush has wanted (and done this outside the reconciliation process), there are likely to be large differences between the House and Senate. Thus, there will be a tough, possibly lengthy, conference between the two houses over a reconciliation bill.
All of this is to say that as a betting man or woman, I wouldn't put down all of your money that a tax cut will get done by Memorial Day.
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Ways and Means Approves Another Tax Bill
On April 27, 2001, the House Ways and Means Committee approved a bill to "reform" pensions (HR 10). Although it was touted as expanding pension coverage for working people, this bill, like the other tax bills passed by the House gives more benefits to those with higher incomes, i.e., those earning over $100,000. It increases the contribution limits for IRAs and 401(k) plans, the maximum pension benefit for retirees, and expands the portability of pensions. For a critical analysis of last year's bill see CBPP's paper.
HR 10 is estimated to cost almost $52 billion over the next ten years, with more of the cost occurring towards the end of the ten years, as in the rest of the tax bills passed by the House. The numbers for the total ten-year cost of tax bills passed by the House this session are as follows:
Estate tax repeal
$185.6 billion
Marriage penalty "relief"
$399.2 billion
Across the board cuts in tax rates
$958.3 billion
Pension "reforms"
$51.7 billion
TOTAL
$1.595 TRILLION
As you can see this is very close to the President's and House Budget Resolution's total tax cut of $1.6 trillion, pretty far from the Senate Budget Resolution's $1.2 trillion, and over the $1.4 trillion that has been discussed as a compromise. And it does not include a number of other tax cuts that will be hard to vote against, including making necessary rate changes in the Alternate Minimum Tax (AMT) or making the corporate Research and Development credit permanent.
The House is expected to vote on HR 10 possibly as soon as the end of this week.
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Charitable Choice Hearings
Two hearings were held in the House of Representatives last week on "charitable choice" legislation that would allow direct federal funding of religious congregations for their social service activities. The Senate Judiciary Committee will be holding a hearing on charitable choice in the near future. These are the first hearings to be held on the controversial law, which was written into welfare reform legislation in 1996. The administration is seeking to expand it to all federally funded service programs.
OMB Watch has submitted written testimony, focusing on H.R. 7, commonly referred to as the "Faith-Based and Community Initiatives" bill, which broadly expands charitable choice for both hearings. It is available at //article/articleview/270/1/47/.
The hearings are the beginning of attempts in the House to link charitable choice and the non-itemizer deduction. While the non-itemizer is widely supported in the nonprofit community, the same cannot be said of charitable choice. If non-itemizer remains linked with charitable choice, many believe it will not be passed this year. The non-itemizer also faces a hurdle expressed by tax experts that it will breed additional tax fraud.
Read the full report on the hearings.
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Reports Urge Foundations To Increase Level Of Grantmaking
Two recent reports on philanthropy highlight the need for a greater level of giving by private foundations, particularly for "communities and organizations traditionally overlooked by charitable giving, but who are in the greatest need of assistance." Payout for Change, released by the National Network of Grantmakers (NNG) on April 26, examines the growth in foundation assets over the past two decades, and a relative decline in grantmaking. It calls on private foundations to increase "payout", which includes grants and administrative expenses, from the federally mandated minimum of 5% to 6%.
The report notes that the number of foundations has more than doubled since 1981, when the 5% rule took effect, growing from 22,000 to nearly 50,000 today. Foundation assets have grown even more, going from $48 billion to almost $385 billion. However, the payout rate has declined in the same period, going from 8% to less than 5%, with many foundations treating the 5% requirement as a maximum rather than a minimum. A 1999 study by Professor Perry Mehrling, Chair of Columbia University's Economics Department, found that foundations could be paying out as much as 8% without eroding their asset base. In fact, Payout for Change states, "While prudent investment is important and relevant to effective grantmaking, the purpose of philanthropy is not the preservation of assets in perpetuity."
The NNG report profiles four funders that have worked to increase their payout rate in order to make a difference in people's lives. One of them is the Unitarian Universalist Veatch Program at Shelter Rock, which supports Southern Echo, a grassroots group working in African-American communities in rural Mississippi. Leroy Johnson, Southern Echo's Director, said, "The problems of today are like cancer -- the sooner we're able to get at it, the better our chances of survival."
The report compares the giving patterns of different types of foundations, noting that small and family based foundations give out grants at a higher level than large foundations. It also found that conservative foundations, which have an average asset size of over $170 billion, report average grants payout of 7.8%, well over the 3% reported by the top 25 largest foundations. The impact of such giving on public policy is highlighted in the Spring 2001 issue of Responsive Philanthropy, in an article titled "Undue Influence: Conservative Think Tanks and the Bush Transition Team", published by the National Committee for Responsive Philanthropy. The article tracks the relationship between the Republican party, conservative organizations and people influencing the administration's policy on education, the environment, communications policy, affordable housing and welfare reform. For more information, see NCRP on the web.
For more information, on Payout for Change, see the National Network of Grantmakers.
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Proposals To Eliminate Tax On Foundations Could Remove Disincentive For Increased Grantmaking
H.R. 804, introduced by Rep. Cliff Stearns (R-FL), earlier this year, would eliminate the excise tax on the investment income of foundations. The tax increases from 1% to 2% if a foundation fails to payout as much or more in a year than its average in the previous five years. As a result, a foundation that pays out a high level in any one year risks increasing its tax liability if circumstances force it to cut back. On April 26, the Joint Committee on Taxation (JCT) made a similar proposal in its study on simplification of the tax system. In lieu of repeal, JCT offers an alternative for simplification.
The JCT report also recommended that the distinction between direct and grassroots lobbying made under the expenditure test for measuring the lobbying of charities be eliminated, calling the resulting recordkeeping "largely unnecessary, but burdensome." This was proposed in a tax bill that died last year.
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IRS Says It Is Still Considering Guidance On Internet Advocacy
An attorney for the IRS confirmed that while it is still reviewing comments submitted on application of tax laws to advocacy and fundraising on the Internet, it does not anticipate changes in substantive law in this area. The remarks were made at a conference at Georgetown University on April 27, and included a statement that posting material on the Internet should not change its tax treatment. More than 4,000 comments were submitted. See OMB Watch's Comments to the IRS.
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Is Bush Turning Green?
In the lead-up to Earth Day (April 21), President Bush affirmed his support for a number of significant environmental protections completed at the end of the Clinton administration. This included new lead reporting requirements, stronger protections for wetlands, a ban on snowmobiles in Yellowstone, and a global treaty that bans 12 deadly toxic chemicals.
Is this the start of a new, greener administration? There are reasons to be skeptical. First, it is important to keep in mind that these protections did not materialize under President Bush. The hoopla over these "decisions" arose out of the expectation that they might be overturned -- and there was very good reason to suspect that they might.
Bush began his presidency by halting all regulatory activity. Then he quickly moved to repeal a number of significant environmental initiatives. This flurry of activity generated a great deal of attention, and Bush faced the prospect of declining public support if the attacks continued.
It's fair to wonder whether the administration would really pursue stronger protections for wetlands, for instance, if it was starting from scratch. It's much easier to say yes to current law than to actually push forward a pro-environment agenda of one's own.
Along these lines, it will be important to pay attention to how the administration handles unfinished work to protect the environment. This includes, for instance, a proposed rule that would improve air quality and eliminate haze in many of the country's national parks and wilderness areas. Will this, and other needed environmental protections, disappear
into the bureaucratic maze? Or will they be carried forward?
Another area to look at will be enforcement. Bush has often talked fondly of "voluntary compliance." Given this philosophy, enforcement of environmental protections -- which was inadequate during the Clinton years -- is likely to wane even further. In the past, enforcement has received very little attention from the media and Congress. This could encourage Bush to see lax enforcement as a convenient way to defang environmental protections without having to pay a heavy political price.
Already, there are signs the administration is headed in this direction. The president's budget proposal cuts funds for enforcement at EPA and devolves enforcement responsibilities to state governments. Such decentralization will make it more difficult to track whether environmental protections are being enforced -- and more difficult to assess whether Bush is really as green as he claims to be.
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OECD Study: Right-To-Know & Precautionary Principle Stem Toxic Ignorance Threat
A report prepared for a meeting of European environmental ministers concludes that the lack of information on the safety of chemicals on the market and the large amounts of hazardous substances emitted into the air, land and water are critical challenges facing governments and the public. The report by the Organization for Economic Cooperation and Development (OECD), "Environmental Outlook for the Chemicals Industry," notes that "the current gaps in knowedge about the characteristics, effects and exposure patterns of existing chemicals must be filled." The report concludes by highlighting the need for stronger requirements on industry to disclose information about their uses of chemicals, greater involvement of workers and the public in policy discussions, and wider dissemination of information about chemicals.
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Arsenic Right-To-Know
Senator Barbara Boxer (D-CA) introduced a bill, S. 796, that would override Bush Administration efforts to kill right-to-know requirements for arsenic in public drinking water systems. The arsenic standards that were halted contained provisions that forced water systems to inform the public if arsenic was detected at levels greater than half the allowable limit. "If President Bush is not going to give people clean, healthy water to drink," Sen. Boxer emphasized, "then at the minimum, families should have the right to know if poison is in the water flowing from their taps."
Sen. Boxer said she would support legal challenges to the Bush Administration's delay in implementing the arsenic standard.
For more information, read the Natural Resources Defense Council's fact sheet on arsenic in drinking water.
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Lieberman to Unveil E-Gov Act of 2001
Senator Joseph Lieberman (D-CT) plans to unveil his "E-Government Act of 2001" on May 1. The 90-page bill is the most comprehensive piece of legislation on e-government to date and the only piece of legislation that focuses on the government's management of its information for access and accountability. By creating a new Office of Information Policy in the Office of Management and Budget (OMB), the bill raises the visibility and importance of information policy and information management in the federal government. The primary intent of the bill is to make the government more accessible, and government information more findable, more accessible, and more usable.
A more detailed review of the bill will be provided on our web site once Senator Lieberman has officially unveiled it.
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Final Rule Issued on Section 508 Federal Acquisition Regulations
As reported in the January 8, 2001 OMB Watcher, all federal executive branch agencies, starting June 21, 2001, must incorporate technologies that are accessible and usable by persons with disabilities, whether federal employees or members of the general public. After that date, any agency purchasing or implementing technology not meeting the requirements set forth in the 12/21/00 Electronic and Information (E & I) Technology Accessibility Standards is open to legal action by employees and members of the public to correct deficiencies in access -- but not to receive punitive compensation.
When the Rehabilitation Act of 1973, the first federal law to include civil rights provisions for people with disabilities, was reauthorized in 1998, Section 508 was added. Under Section 508 (29 U.S.C. § 794d), agencies must give disabled employees and members of the public access to electronic and information (E&I) technology that is comparable to the access available to others. The law applies to all Federal agencies when they develop, procure, maintain, or use E&I technology. The 1998 legislation provided a timetable for implementation of Section 508 and established an enforcement procedure (citizens and federal workers can both sue and file formal complaints against agencies that do not comply with the access standards.) The U.S. Access Board was required to develop access standards that will become part of the Federal procurement regulations. The General Services Administration (GSA) and the Access Board are directed to provide technical assistance to individuals and Federal agencies concerning the requirements of Section 508. The Department of Justice (DOJ) is required to submit biennial reports to Congress and the President.
As part of DOJ's mandatory biennial report to Congress and the President on federal government compliance with Section 508, a memorandum was issued on January 18 to assist agencies in evaluating the accessibility of electronic and information technology. Agencies were to submit their evaluations to DOJ on April 6, with the expected release date of the DOJ report set for August 7, 2001.
On April 25, the final Section 508 Federal Acquisition Regulations (FAR) rule was published in the Federal Register. Under amendments developed by two federal procurement councils -- the Civilian Acquisition Agency Council and the Defense Acquisition Regulations Council -- FAR will require agencies to follow Section 508 standards on contracts awarded and signed (not just soliticitations issued) after June 25, 2001 -- even if contracts are solicited and negotiated before the standards take effect. Agencies can claim exemption from Section 508 standards before they sign contracts, under certain circumstances, such as:
- an "undue burden," which, while somewhat vague, must be documented; or
- utilization for national security functions.
