As always, our goal in hosting these conferences is to provide our partner CPAs and the businesses they serve with the information necessary to stay ahead of emerging economic and policy trends. Keeping this in mind, here are four key takeaways from our latest Economic, Legislative & Policy Summit:
Four Takeaways From alliantgroup’s Economic, Legislative & Policy Summit
1. Healthcare, Tax Reform and a New Budget Bill are Top Congressional Priorities for 2017During his keynote address, Senator Cornyn emphasized these three issues as the top congressional priorities for 2017, a sentiment that was echoed by alliantgroup’s panelists before and after Senator Cornyn’s address. Elaborating on a loose timeline put forth by congressional leadership, Cornyn stated that he anticipates Congress will move on to tax reform and a new budget bill after an expected healthcare vote in the Senate—no matter the results of that vote.
“If we can do healthcare reform, and if we can do tax reform, I would say that would be a good 2017,” said Cornyn.
In an earlier panel, former U.S. Secretary of Agriculture Mike Johanns explained the logic in moving on healthcare first, noting this vote would provide an accurate gauge on where GOP membership currently stands and on the amount of money that will be available to help offset any tax reform legislation later this year. According to Dean Zerbe, the former Senior Counsel to the U.S. Senate Finance Committee, should the Affordable Care Act remain in place, this means GOP leadership would have $1 trillion less to help offset reductions in both corporate and marginal tax rates. This scenario would guarantee that additional business provisions would need to be eliminated to avoid raising the deficit, thereby making a more comprehensive reform of the tax code an even heavier lift for congressional Republicans.
2. Congress is Tempering Expectations on Tax ReformWhile multiple panelists and Senator Cornyn made clear that comprehensive tax reform remains on the top of the agenda for congressional Republicans, Senator Cornyn and alliantgroup’s policy experts tempered expectations for a complete overhaul of the tax code. Given the competing interests of different groups and industries and the deep political divide in Washington, former Tax Counsel to the U.S. Senate Finance Committee Dawn Levy O’Donnell emphasized how difficult it would be to build a consensus on a comprehensive tax reform bill.
“Given the political divide, I think it is going to be really hard to get a bipartisan bill,” said O’Donnell.
To bypass the current political stalemate, the GOP’s current strategy in the Senate is to pass a tax reform bill through reconciliation, a legislative process that allows a bill to pass with just 51 votes. Passing a bill in this manner, however, has strict budgetary and scoring restrictions, thereby narrowing the scope of any potential legislation. Instead of comprehensive reform of the tax code, Senator Cornyn and alliantgroup’s experts forecasted a more scaled back tax bill that would reduce corporate and marginal rates, along with other pro-business changes.
“I think you will see rate reduction,” said Johanns. “How big will it be? That’s a good question.”
3. Economic Growth and Productivity are Lagging—and the U.S. Needs More STEM-Workers to Reverse the Trend
On the first day of the event, former U.S. Congressman Rick Lazio, Private Equity and M&A Advisor Neeraj Mital and alliantgroup CEO Dhaval Jadav hosted an economic update to provide deeper context into a number of key economic indicators.During this panel, Lazio noted that while the U.S. was in the midst of an eight year economic expansion, this expansion was also the weakest on record, with GDP growth hovering only around two percent during this period. According to the panel, this drop in growth has had real ramifications in the lives of ordinary Americans and is partly to explain for deepening economic anxiety across the country (even in the face of low unemployment numbers).
What is the root cause of reduced economic growth? Mital and Lazio tied the slowed growth rate to an overall drop in worker productivity and a decrease in the number of qualified workers in the labor pool. According to Mital, from 1995-2005, per capita productivity grew by 1.6 percent in the U.S. per year. From 2005-2016, productivity decelerated by 75 percent, highlighting the shortcomings of a workforce that must modernize its skillsets—particularly in the fields of the science, technology, engineering and mathematics (STEM)—to remain competitive with the rest of the world. For those currently in the workforce, expanding their skillsets to keep pace in a modern economy is an absolute necessity as automation and technology continue to change the nature of (and in many instances, eliminate) particular professions.
“A recent study came out and said that in 15 years, 40 percent of all U.S. jobs will become extinct,” said alliantgroup CEO Dhaval Jadav. “Why is that? The United States has more administrative and clerical jobs than any other country, and because of automation and robotics, in 15 years those jobs will no longer exist.”
As industries such as manufacturing shift from assembly line jobs to occupations that are tied to the design, development and the integration of automated production and assembly line systems, an emphasis on STEM-based skills will be necessary to not only keep people employed, but to stimulate economic growth.
4. Reforms in Education and Tax Policy Will be Key in Creating a More Competitive—and STEM-oriented—Workforce
To ultimately increase growth and productivity, alliantgroup’s experts endorsed a wide-range of policy fixes—key among these being tax and educational reforms. During an interactive roundtable session with our association and CPA partners, alliantgroup’s experts advocated for STEM-oriented education and training programs as a long-term solution to ensure the current (and future) generation has the skills needed to participate in a 21st century economy. This included the need to emphasize STEM-based education at an earlier age and the need to train (and in many instances, retrain) workers on new skills, be it through public-private partnerships or trade schools.
“We tend to think of training as late teens, early 20s,” said Mital. “But I think the repurposing of people over the course of their career as technology dislocates people is as important.”
For short-term solutions, alliantgroup’s experts endorsed changes to the tax code that would incentivize investment, promote job growth and encourage research and development and domestic manufacturing. In particular, former Senior Counsel to the U.S. Senate Finance Committee Dean Zerbe highlighted ideas to further strengthen domestic R&D and manufacturing, noting a recent bipartisan bill introduced by Senators Chris Coons and Pat Roberts that would enhance the value of the Research and Development (R&D) Tax Credit for companies that perform their manufacturing operations in the U.S.
At alliantgroup, we remain committed to retaining high-paying technical jobs in the United States and would love to hear your feedback on the policies discussed during the summit and any feedback on the event itself. Please contact us at (844) 899-0896.