Government Affairs Roundup for 9.5.24

Government Affairs Roundup
“Your Timely Roundup of Local, State, and Federal Updates”

Chamber members:

Today’s focus will be on pro-growth tax policies that are scheduled to end in 2025.


*Government Affairs Roundup brought to you by CITGO*

The Urgent Need for Pro-Growth Tax Policies
A competitive U.S. tax system is crucial for driving wage growth, enhancing the standard of living, and fostering overall economic expansion. To achieve sustained economic growth of at least 3% annually, as outlined in the Growth and Opportunity Imperative, we alongside local chambers the U.S. Chamber of Commerce have been urging candidates and elected officials to prioritize tax policies that stimulate growth.

Upcoming Legislative Opportunities

Next year, lawmakers have a critical opportunity to promote pro-growth tax policies while averting what could become the largest automatic tax hike in American history. Several key provisions related to individual, business, and estate taxes are set to expire, threatening to reverse recent economic gains.

Tax policies significantly influence economic growth, particularly by encouraging capital investment, which boosts productivity and wages. Pro-growth tax policies enhance U.S. global competitiveness, attracting jobs, businesses, and innovation.

The 2017 Tax Cuts and Jobs Act (TCJA) serves as a recent example of successful tax reform. It lowered and simplified the federal income tax burden on American families and businesses while modernizing how the U.S. taxes business and investment income. The results included wage growth for production and non-supervisory workers, increased business investment, and economic expansion that exceeded forecasts.

Taxes are essential for funding government functions, but they also act as a deterrent to the activities they target, whether it be work, investment, or consumption. In a global economy, the U.S. tax rate relative to other nations directly impacts the level of investment and production that the country can attract. Effective tax policy should minimize negative impacts on economic growth, ensuring the U.S. remains competitive globally, retains and attracts businesses, and continues to improve the standard of living for its citizens.

Legislative Priorities for Growth

As the expiration of critical tax provisions looms, the chamber calls on Congress and the administration to take decisive action. Key priorities include:

  • Preserving the competitive business tax rates, such as the 21% corporate income tax rate and the 20% pass-through deduction for qualified business income.
  • Ensuring a competitive business tax base by maintaining deductions for research and development (R&D) expenses, allowing full capital expensing for business assets, and adopting a pro-growth interest deductibility limitation.
  • Maintaining a competitive international tax system that benefits both U.S. companies operating abroad and foreign companies investing in the U.S., while safeguarding the corporate tax base.
  • The Differential Impact of Tax Policies on Economic Growth

Not all tax policies are created equal in their effects on economic growth. For instance, taxes on capital expenditures and R&D spending can severely hamper economic activity because these investments drive future growth. Similarly, higher taxes on capital gains discourage investment, reducing the funds businesses can use for expansion and innovation.

Progressive tax structures, which increase tax rates as income rises, can also negatively impact economic growth by creating disincentives to work or invest. On the corporate level, higher taxes on business profits can reduce returns to shareholders, lower employee wages, and increase consumer prices, all of which harm economic performance.

The 2017 Tax Reforms and Their Impact

The 2017 Tax Cuts and Jobs Act (TCJA) marked a significant step in fostering economic growth through tax reform. Research indicates that the TCJA spurred domestic investment, particularly among multinational firms, leading to increased capital stock and higher wages. The reforms also halted the trend of U.S. companies relocating abroad to escape high taxes, while boosting wage growth for production and non-supervisory workers.

However, many of the TCJA’s pro-growth provisions are set to expire, threatening to undo the economic gains achieved since 2017. The ability of businesses to deduct the full cost of capital investments and R&D expenses has already begun to phase down, and stricter limitations on interest deductibility have increased the after-tax cost of debt-financed investments.

At the end of 2025, the expiration of the TCJA’s lower individual tax rates and the 20% deduction for pass-through business income could further stifle economic growth. For multinational companies, rising effective tax rates on foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI) will reduce incentives to maintain headquarters and intellectual property in the U.S.

To sustain and build on the economic progress achieved through the TCJA, the next Congress and administration must prioritize comprehensive, industry-neutral solutions for a pro-growth and globally competitive U.S. tax system. Thoughtful tax policy can drive economic growth while also promoting fiscal responsibility. Lawmakers must carefully weigh the trade-offs to shape a tax system that supports continued prosperity for all Americans.

Gov. Pritzker Issues Disaster Proclamation After Severe Weather and Flooding Affects Multiple Counties in Illinois
Governor JB Pritzker issued a Disaster Proclamation following the severe weather and flooding that affected Cook County, Henry County, Fulton County, St. Clair County, Washington County, Winnebago County, and Will County on July 13 through July 16. This proclamation comes after the Illinois Emergency Management Agency and Office of Homeland Security (IEMA-OHS), in collaboration with local governments, concluded extensive field work to assess the damage and destruction caused by the storms in communities across Illinois.

Based on reports received by the IEMA-OHS, local resources and capabilities have been exhausted, and state and federal resources are needed to respond to and recover from the effects of these severe storms.

“Many areas across the state suffered extensive damages due to last month’s torrential rain, high winds, and flooding,” said Governor JB Pritzker. “To support those impacted across the state, I have signed a disaster proclamation to mobilize every available resource, accelerating the recovery process and providing relief for our residents. I want to thank IEMA-OHS for their ongoing coordination.

“After our Joint Preliminary Damage Assessment with local, county, and Federal Emergency Management Agency (FEMA) partners in multiple municipalities across the state, we have found significant damages,” said Illinois Emergency Management Agency and Office of Homeland Security (IEMA-OHS) Director Alicia Tate-Nadeau. “Our Recovery Division continues to work closely with each of the affected communities helping them to recover from this severe weather.”

On July 13 through July 16, severe storms passed throughout the state producing heavy rainfall, high winds, flash flooding, tornadoes, and 6.5 inches of precipitation. This severe storm system caused substantial flooding resulting in significant property damage with widespread power outages and blocked roadways affecting homeowners, businesses, utilities, and local governments. This storm also caused disruptions to transportation due to flash flooding, widespread debris limited access to roadways, and power outages impeded work efforts.

While state officials have been working closely with impacted communities to provide resources, this proclamation allows local entities to access additional state resources and emergency personnel who can assist in their continued response and recovery efforts. Governor Pritzker has requested a federal Major Disaster Declaration from the President of the United States through FEMA. If approved, this declaration would enable impacted communities to access individual assistance from FEMA and disaster loans from the U.S. Small Business Administration (SBA).
The Disaster Proclamation goes into effect immediately.

For Recurring Business:

The Illinois Workforce Innovation Board invites you to join our Business Focus Groups & Roundtables!
Your insights are crucial to shaping and implementing effective workforce development solutions!

KEY DISCUSSION TOPICS:

  • Sourcing Qualified Candidates: Discuss difficulties in finding candidates with the right skills and qualifications.
  • Training and Upskilling: Explore effective training programs and upskilling initiatives that can bridge the skills gap.
  • Retention Strategies: Share strategies for retaining skilled workers in a competitive market.
  • Partnerships with Educational Institutions: Identify opportunities for collaboration with schools and training centers.
  •  Innovative Workforce Solutions: Discover and contribute to innovative approaches to workforce development.

UPCOMING EVENTS REGISTRATION LINKS

Stay well,

Mike Paone
Executive Vice President
Joliet Region Chamber of Commerce & Industry
mpaone@jolietchamber.com
815.727.5371 main
815.727.5373 direct