In This Issue Roadblocks Go Up For Estate Tax Repeal Democrats and Tax Cuts: Getting Good Numbers Can Bush Balance the Budget? Fuzzy Math in the Bush Tax Plan Administration Attacked for Stay of Contractor Responsibility Rule Bush Seeks to Suspend Black Lung Rule What Is OMB Trying to Hide? Opposition to Global Gag Rule Grows OMB Watch: IRS, Allow Flexibility for Nonprofit Advocacy EPA Goes Online with Comments on Rules Tech Help: Wireless Technology Roadblocks Go Up For Estate Tax Repeal The movement to repeal the estate tax hit a major roadblock as a number of wealthy individuals signed a petition to oppose repeal of the tax they must pay. William Gates, Sr., who helped to spearhead the petition, said if it were not for his full-time job as co-chair of the Bill and Melinda Gates Foundation, he would organize a group called Millionaires for the Estate Tax. As of today, 435 people whose estates would be required to pay the tax signed the petition to oppose repeal. An additional 174 people who would not have to pay the tax also signed the petition. As billionaire Warren Buffett told the New York Times, "Without the estate tax, you in effect will have an aristocracy of wealth, which means you pass down the ability to command the resources of the nation based on heredity rather than merit." This remains the heart of the issue: maintaining the pluralistic principles underlying our democracy. And the estate tax is a key component of reducing concentrations of wealth. But Rep. Jennifer Dunn (R-WA) has a different perspective. She is a firm advocate of repealing the estate tax and has responded to the growing voice of charities that say that repeal of the tax would hurt charitable giving and reduce government revenues that are used to fund programs central to our communities. "I believe when people have more dollars in their pockets they'll give more to charity. That's a very deep thread of altruism that runs through us," argued Dunn on CBS News last night. Supporters of repeal claim that there will be a "new era of spiritual depth in philanthropy," as Paul Schervish recently wrote in the Chronicle of Philanthropy. "I think that's just dead wrong," said Father Bill Greenlaw of New York's Holy Apostles Church in response to Dunn on the CBS News story. Greenlaw has to raise $34,000 every week to keep his soup kitchen running and knows the importance of the estate tax. Even John DiIulio, the head of the new Office of Faith Based and Community Initiatives in the Bush White House, disagrees. He was quoted as saying that he opposed repeal of the estate tax. Others in the nonprofit community agree that repeal of the tax would severely hurt charities. A new nonprofit coalition, which is being coordinated through OMB Watch, was formed last week to fight against repeal of the estate tax. To join the coalition email list, visit the Estate Tax Resource web page. Or send email to estatetax@ombwatch.org and give your name, organization (if any), address, phone and fax. Back to Top First, Get the Numbers Right On February 15, 2001, House and Senate Democrats unveiled their tax plan, which appears to be short on details of what taxes would be cut. It might more appropriately be called a "surplus plan," dividing the ten-year surplus into thirds – for tax cuts, for spending, and for debt reduction. It serves to set a "bottom" limit on tax expenditures in order to start negotiating for some middle ground. (But given the universal rules of bargaining, we would have liked the Democrats to have started with a much lower bid than almost $1 trillion in order to bring down Bush's $1.6 trillion.) Here's how the Democrats' plan works: From the $5.6 trillion ten-year surplus, subtract the Social Security surplus of $2.5 trillion (already considered part of the off-budget surplus) and the Medicare surplus of $400 billion, a total of $2.8 trillion. (Presumably these "off-budget" surpluses will be used only for debt reduction.) Then, divide the remaining $2.7 trillion into thirds: approximately $900 billion for debt reduction; $750 billion for tax cuts; and $750 billion for "critical priorities like education, prescription drugs and defense" as well as for emergencies. The $300 billion missing from the tax cut and spending thirds is set aside for the purpose of paying the increased interest costs. Details of the actual tax plan are sketchy – some reports suggest that it would include reform (but not repeal) of the estate tax, a reduction of the marriage penalty, and an increase in the earned income tax credit for low-income families. Since the budget debate is currently an argument about the numbers, the Democrats are also pointing out that President Bush's $1.6 trillion tax plan will actually cost $2.6 trillion, once the costs of extending popular tax provisions ("tax extenders," in budget-speak), adjusting the alternate minimum tax, accounting for increased debt service costs, and making part of the tax cuts retroactive are included. The Center on Budget and Policy Priorities has estimated the cost at as much as $2.5 trillion, including the "tax extenders," increased interest payments, use of the latest economic assumptions, and retroactivity of some portions of the tax plan. CBPP has also disputed the $2.7 trillion dollar surplus, arguing that the non-Social Security surplus is more realistically about $2 trillion, and thus the Bush tax cuts will actually exceed the surplus. Back at the ranch, Bush officials insist that the tax cut will be limited to $1.6 trillion, excluding the costs of increased interest. In this light, it is interesting to note that according to a Bureau of National Affairs report on February 20, 2001, Joint Committee on Taxation (JCT) Chief of Staff Lindy Paull said that extending the Research and Development tax credit (which is part of President Bush's tax plan) may now cost about $47 billion over ten years, according to a preliminary JCT estimate, rather than the $23 billion previously estimated. This is one small sign of how much this huge tax cut could actually cost once all is said and done. If the Administration is really committed to keeping the tax cut to $1.6 billion, some of the provisions may need to be dropped or changed. Meanwhile, two Senate Republicans – Senate Finance Committee member James Jeffords (R-VT) and Sen. Lincoln Chafee (R-RI) – have said they will not support the President's tax proposal in its current form. Senate Finance Committee member Olympia Snowe (R-ME) has expressed uncertainty as to whether she would vote for the measure unless there were a "trigger" mechanism to stop the cuts if the surplus does not materialize. The budget resolution, which will be determined in March 2001, for FY 2002 will essentially set the amount of tax expenditures for the foreseeable future – making it very important. We cannot be complacent – there are many conservatives who would like nothing better than to implement a huge tax cut that will use the entire surplus – what better way to insure a shrinking government? After the numbers are set, the fight to determine the content of the tax cuts will begin. But no matter how you count it, stopping a tax cut is raising taxes, and that's not going to be easy to do. Back to Top How Will President Bush Balance the Budget? We'll have to wait until President Bush's budget outline for FY 2002 is released on February 28 (although there may be hints during the Presidential Address to a Joint Session of Congress on February 27), but there are lots of indications that those of us who care about programs for low-income and vulnerable populations have much to worry about. President Bush keeps insisting that there is enough money to have a $1.6 billion-plus tax bill, in addition to paying down the debt, investing more in education, the military and a prescription drug benefit, and keeping overall discretionary spending at FY 2001 levels adjusted for inflation. Will it really work? One strategy is to use the "inflated" baseline (spending growing at the rate of inflation), but exclude budget "earmarks" that were added to the FY 2001 appropriations before adding the inflation percentage. This could mean that discretionary spending actually shrinks. Further, the "inflated" baseline does not take into account the fact that many domestic investments have been starved and long-neglected while the effort was made to balance the budget; nor does it reflect costs due to an increased population. If education and military spending are increased above the inflated baseline, which President Bush seems to be indicating, and a prescription drug benefit is made law, cuts in other programs are guaranteed. There may be some meaningless language about how further savings will be achieved by eliminating government waste, but it seems fairly clear that we can anticipate cuts in programs. Anytime there are program cuts, we can be sure that programs benefiting low-income people will be at the top of the list. Another budget tool now called upon to justify large tax cuts based on less-than-certain surplus estimates is a "trigger" mechanism, which would prevent the tax cut from happening if the surplus figures do not materialize as expected and/or the tax cut were to cut into the Social Security component of the surplus. This sounds like a good idea, but many analysts think that the trigger will be unenforceable and will simply serve to make it easier to pass a huge tax cut. As in the case of the so-called "lockboxes" to insure that the Social Security and Medicare surpluses are not spent on other programs or tax cuts (the most recent of which was passed by the House on February 13 as HR 2), a "trigger" device would likely be a fairly ineffectual way to rein in the cost of a tax cut. A third possible tool for balancing the budget are "budget caps." The current budget "caps" run out in FY 2002, and, because they were set at unrealistically low levels, they have largely been ignored during the budget surplus of the past couple of years. There will probably be an effort to establish new and continuing caps. Even though there is talk of making the caps more "realistic," presumably by setting them at FY 2001 levels and adjusting them for inflation, given the other claims posed by tax cuts and debt reduction, new caps will likely severely limit discretionary spending. In addition to the cost of the proposed tax cuts, the amount of discretionary spending will be determined in the congressional budget resolution. This budget resolution is shaping up to be one of the most important in years. The cost of tax cuts and the allocations for discretionary spending will have effects for years to come. Back to Top Fuzzy Math? Allegations and counter allegations continue about who will benefit most from the Bush tax plan. Will the single mother/waitress really get a break? Will the richest be able to buy a new Lexus while the middle-class can only afford a used muffler? Who is the "average" "typical" American family? Amid all the hype, the Philadelphia Inquirer designed a chart that presents tax savings in terms of a percentage of income. It shows that the rich really do benefit more from the Bush tax cut – a single person making $1 million would get a cut of $53,028 or 5.3% of income, while a husband and wife with two children making $50,000 would only get $1,600, only 3.4% of their income. The author posits that a fairer tax cut proposal would give everyone a tax cut that was about the same percentage of each person's income. This would still direct the majority of the tax benefits to the rich, but at least would ground such benefits in the fact that the rich earn more – and not just because the tax code favors them. Back to Top Administration Draws Fire for Stay of Contractor Responsibility Rule The Bush administration recently suspended a rule – finalized toward the end of the Clinton administration, and already in effect – that requires government contracting officers to take into consideration a company's record of complying with the law (including tax laws, labor laws, employment laws, environmental laws, antitrust laws and consumer protection laws) before awarding federal dollars. This represents the first step toward revoking the rule altogether – which business interests have been clamoring for since Bush became president. And it is the first direct shot by the new administration at a major Clinton-era safeguard. Firing back, Sens. Richard Durbin (D-IL), Edward Kennedy (D-MA), and Joseph Lieberman (D-CT) wrote to Office of Management and Budget (OMB) Director Mitch Daniels on February 20 asking that the administration halt its "unwise and possibly unlawful efforts to suspend the requirement that the government not do business with chronic lawbreakers." Specifically, the senators pointed to a recent legal memorandum by the nonpartisan Congressional Research Service (CRS) that concluded the administration's suspension of the rule "would likely be held by a reviewing court to be legally deficient on its face." In suspending the rule, Al Matera, chairman of the Civilian Agency Acquisition Council (CAAC), issued a memorandum on January 31 permitting civilian agencies to use what is called a "class deviation" to stay the Contractor Responsibility Rule until July 19, 2001, or until issuance of a new rule, whichever comes first. The General Services Administration (GSA), NASA, and the Departments of Transportation and Interior are among the agencies that have subsequently suspended the rule in accordance with the memo. In the memo, Matera claimed that agencies have authority under the Administrative Procedure Act (5 USC 705) to issue such a stay pending judicial review of the standard (the Chamber of Commerce and others have already filed suit to overturn it), even though it has already taken effect. Yet according to CRS, "Our examination of applicable law and precedent indicates first, that a substantial argument may be made that the CAAC suspension was not supported by a proper showing of cause as has been required by the courts applying Section 705. Second, there is substantial doubt whether Section 705 is the appropriate legal vehicle for an agency to use to effect the suspension of an already effective rule. Finally, it could be argued that since the rule had already gone into effect, the appropriate course of action under applicable case precedent would have been to suspend the rule through a rulemaking proceeding..." But whether the administration has the legal authority to suspend the rule or not, Durbin, Kennedy, and Lieberman point out that "it is unfair for the Administration to delay the implementation date for six months without notice or any consideration of the views of the public." This is particularly galling given that the rule is meant to protect the interests of the public. "We support the common-sense principle embodied in the Contractor Responsibility Rule that government contracts should not be awarded to companies that routinely disregard laws designed to protect workers, the public, and the environment," write Durbin, Kennedy, and Lieberman. The Bush administration apparently feels differently. Back to Top Bush Seeks to Suspend Black Lung Rule Several weeks ago, the Bush administration entered into an agreement with the coal industry to suspend a rule that would make it easier for coal miners with black lung disease to receive benefits. The rule was being challenged by the National Mining Association in U.S. District Court when the deal was struck – although the judge presiding over the case only granted a partial stay, saying he did not think he had the authority to fully suspend the rule. Currently, coal companies frequently hire doctor after doctor and expert after expert in an effort to block a victim's black lung claim. This process requires the victim to hire his own expert – often at enormous personal cost – to counter the company's experts. The new rule seeks to put an end to this situation by limiting the number of medical "reports" each side can gather to two. The United Mine Workers (UMW) thought it had assurances from Bush during the campaign that he would uphold the new protections for black lung victims. That now appears to be in doubt, and the UMW has responded with outrage. Back to Top What Are They Trying to Hide? As the Bush administration begins its attack on Clinton-era regulatory activity, the public is being left in the dark. Specifically:

• What regulations from the Clinton administration did the Office of Management and Budget (OMB) allow to proceed, and what were rejected? Under the Card memo, which suspended regulatory activity, agencies are to notify the director of OMB, Mitch Daniels, "of any regulations that, in your view, impact critical health and safety functions of the agency" and therefore should be allowed to move forward. OMB then has authority to review these regulations, and make a final determination. Unfortunately, the Card memo does not require disclosure of rules sent to OMB for review. Nor does it require disclosure of whether a rule was rejected or approved under this process, along with a justification for any decision made.
• Will the public be notified of decisions on regulatory activity from the Clinton administration? The main purpose of the Card memo was to give incoming agency heads an opportunity to review regulatory activity of the previous administration – including final rules, proposed rules, and ongoing rulemakings. This action is typical with a change of administrations. But unfortunately, the outcome of these reviews is unlikely to be transparent. There has been no guidance from the White House or OMB on disclosing such information. As a result, rulemakings are likely to be abandoned or shut down without any notice to the public.
• What instructions are being issued to agencies on regulatory activity? On January 26, OMB Director Mitch Daniels issued guidance to the agencies on how to implement the Card memo. Specifically, he instructed agencies to withdraw all standards left over from the Clinton administration that were still pending review at OMB (all major standards must be approved by OMB before they can go on the books). This memo was not made publicly available through OMB’s web site until weeks later. Likewise, as discussed in detail below, the Bush administration ordered the suspension of a rule that requires government contracting officers to take into consideration a company's record of complying with the law (including tax laws, labor laws, employment laws, environmental laws, antitrust laws and consumer protection laws) before awarding federal dollars. This was also not made available to the public. One can only guess what other orders have been given to agencies, as the public is left in the dark.
• Who is shaping the reviews of Clinton-era regulatory activity? It’s no secret that business lobbyists would like to undo many recent protections for health, safety, and the environment – and they have been talking very confidently about the likelihood of this happening. What role have these special interests played in the reviews being conducted by the agencies? Of course, this is not being disclosed. But it does appear that business interests are being consulted closely, while the general public is once again left out in the cold.

Recently, Sen. Joseph Lieberman (D-CT) and Rep. Henry Waxman (D-CA) wrote to the administration expressing their concern that implementation of the Card memo "could be used to undermine long-needed safeguards." To monitor its implementation, they asked the Bush administration to provide answers to a number of questions regarding its regulatory dealings. The administration has not yet replied, but this sort of disclosure should not require prompting from members of Congress. It should be made publicly available as a natural part of doing business. During the Clinton administration, significant steps were taken in fostering a more accountable and transparent federal government. Yet to be sure, there remains much to be done. For instance, the executive branch has substantial authority to grant waivers from federal requirements – particularly in the case of entitlement programs. These waivers can be issued with virtually no notice to the public. The Bush administration can address this, and other issues, to continue to advance government transparency. Unfortunately, the administration is not off to a good start, and in fact, is headed in the wrong direction. Back to Top Opposition to Global Gag Rule Grows On February 15, legislation was introduced in both the House and Senate that would reverse the Bush administration's policy on a foreign nonprofit's ability to advocate on abortion issues with its own money. This gag rule was put in place by the Reagan administration and continued under the elder Bush's administration, but was overturned by President Clinton. The legislation, the "Global Democracy Promotion Act of 2001" is sponsored by Rep. Nita Lowey (D-NY) in the House and Sen. Barbara Boxer (D-CA) in the Senate, and cosponsors include several anti-abortion Republicans. The legislation states that foreign non-governmental organizations "shall not be subject to requirements relating to the use of non-United States Government funds for advocacy and lobbying activities" orher than those already part of the 1961 Foreign Assistance Act. It also states that these organizations will not be ineligible for federal funds based soley on the "basis of health or medical services" provided with non-federal funds. More information on the global gag rule is available in OMB Watch's Nonprofit Advocacy analysis. Back to Top OMB Watch Urges IRS to Take Least Restrictive, Flexible Approach to Nonprofit Advocacy on Internet OMB Watch, along with over 4,000 other organizations and individuals, filed comments with the Internal Revenue Service (IRS) responding to their Fall announcement asking for input on how tax laws should apply to nonprofits' Internet activities. Our comments focused on questions the IRS asked about nonprofit use of the Internet for lobbying and voter education activities, urging the IRS to take a least restrictive approach so that nonprofits can continue expanding ways to use e-mail, websites and other Internet tools for advocacy activities. The 1997 Supreme Court ruling Reno v. ACLU, which struck down limits on Internet speech in the Communications Decency Act, was cited as a reminder that the IRS should be careful not to interfere with nonprofits' free speech rights. We also encouraged the IRS to proceed incrementally, concentrating first on areas with the most potential for fraud and abuse, such as Internet based fundraising activities. On specific points we urged the IRS:

• To consider a website as an entity housing multiple publications, similar to a library, rather than as a single publication;
• To recognize links as part of the structure of the web, so statements on linked sites are not considered statements of a linking site, unless there is a clear endorsement;
• Not to inhibit statements that can be made in online discussion groups by making the host responsible for statements of others, absent a statement of endorsement.

The complete text of OMB Watch's comments are now available on-line. Back to Top Who Said What? EPA Goes Online with Comments on Rules EPA is launching an electronic regulatory docket system that would give a citizen in Peoria with an Internet connection the same access to paper-based comment dockets as the best-dressed K Street lawyer. The system is designed to allow any individual to view others' comments on proposed rules and submit her or his own comments. As the system is now conceived, users could post anonymous comments, but comments deemed irrelevant would not be included in the system. Beta testers of the new system report that the new system does not allow the user to electronically thumb through comments that have already been submitted. Instead, users have to run searches and won't know if the results are capturing all of the available comments. EPA should provide a list of comments submitted, including the name of the commenter, organization affiliation, and the complete text of each comment. The Securities and Exchange Commission has for many years provided overnight access to comments on its proposed rules. You can, for example, find and read OMB Watch's 1997 comments on proposed rules that would have required public companies to disclose their charitable contributions. EPA's site would also allow anonymous postings of comments, so users could see the comments without identifying the source of the comment. Commenting on policy ideas is fundamentally a public activity, and anonymity runs counter to democratic ideals of open communication between interested parties. Back to Top Tech Help: Special: Wireless Technology and Cellular Phones Cellular telephones are becoming increasingly ubiquitous for the American public, and indidivuals within nonprofits. Yet for all of its potential uses, there is very little understanding about cellular technology by nonprofits. In a special NPTalk, we provide a basic primer on cellular technology to help nonprofits prepare for the next wave of telecommunication innovation. Subscribe to NPTalk Back to Top Notes and Sidebars URGENT: HUGE TAX CUT OPPOSITION STRATEGY MEETING A strategy meeting for nonprofit organizations to oppose the huge tax cuts that threaten to use up the budget surpluses for years to come is scheduled for Friday, February 23 from 10 a.m. to noon at 2000 M Street NW, Suite 800, Washington, DC. This meeting is supported by a number of groups including Invest in America and OMB Watch, and is being cosponsored by People for the American Way (PFAW) and the American Federation of State, County and Municipal Employees (AFSCME). For more information and to RSVP, please call PFAW at 202/467-2304. A Good Tax Cut! A good tax cut! Groups continue to urge Congress to raise the child credit from $500 to $1000 AND to make it refundable, a move that could lift more than two million children out of poverty. See action alerts by the National Campaign for Jobs and Income and the Children's Defense Fund. Rules Withdrawn Rules left over from the Clinton administration continue to be withdrawn from OMB at a rapid rate. HREF="http://www.whitehouse.gov/library/omb/OMBREGS.html">See OMB's OIRA site to follow the action. IRS Seeks Comments on Form 1023: Application for Tax-Exempt Status for 501(c)(3) Organizations Nonprofits are invited to provide the IRS with comments on Form 1023 as part of an ongoing effort to reduce paperwork and ensure the usefulness of information collected. Comments are due April 16 and should be sent to Garrick Shear, IRS Room 5244, 1111 Constitution Ave, NW, Washington, D.C. 20224. For more information see the Federal Register Online, Vol. 66, Number 31, February 14, 2001. MAKE YOUR VOICE HEARD! SIGN ONTO THE INVEST IN AMERICA STATEMENT OF PRIORITIES The Invest in America coalition continues to press for increased domestic investment in programs that will provide opportunities to low-income people and create stronger and safer communities. We have revised our original Statement of Principles and will be sending the new Statement of Priorities to the Administration and Congress. We hope to get even more organizations on the list of supporters, so sign on now! Water, Energy and the Law Conference Tulane Law School's "Water, Energy and the Law" conference in New Orleans will be held on March 9-11, 2001. The conference will examine issues in environmental policy from international and regional perspectives, taking a close look at the potential of environmental management systems, climate change and energy policy, and the threats from free trade on marine protection. For more information, contact Linda M. Walker (lwalker@law.tulane.edu, TEL: 504.862.8561). Independent Sector Independent Sector 2001 Spring Research Forum, "The Impact of Information Technology on Civil Society," in Washington, DC, will be held on March 15-16, 2001. Registration information regarding the conference is available on IS's website, or call Tracy Fleming at 202-467-6100. Social Justice Movements and the Internet The Peace Review Journal, an international and multidisciplinary journal of peace, social justice and human rights, is seeking papers for a special issue on social justice movements and the Internet. This issue aims to examine whether the Internet is really a significant force for progressive political practice and how social justice movements are using the Internet. More information, including the Peace Review's Writer's Guidelines and suggested topics, is available online. In addition, questions may be addressed by e-mail to Dorothy Kidd or Bernadette Barker-Plummer or by calling 415.422.6680. The Century Institute Summer Program for Undergraduates Applications are now being accepted for The Century Institute Summer Program, a two-week fellowship designed to introduce undergraduate students to the progressive tradition in American public policy. The program will be held at Williams College in Williamstown, MA from July 1 through July 14, 2000. The program is open to any student who is a sophomore or junior in the 2000-2001 year, who has an interest in public policy and civic engagement. More information and an application is available at the The Century Institute's web site.