Legislative Update: VI Calls on Congressional Leaders to Restore Tax Credits Ensuring US Manufacturing Innovation and Competitiveness

The Vinyl Institute joined other leading manufacturers in a letter from the R&D Coalition urging Congress to revive an expired research and development tax credit that would allow U.S. manufacturers to continue to grow, innovate, and maintain their edge over foreign competitors. The coalition warned that amortization of research expenses would reduce R&D spending and lead to the loss of more than 20,000 R&D jobs in the first five years.

U.S. manufacturers are already at a disadvantage because China’s tax policies offer significant R&D incentives, including a measure that allows manufacturers to deduct 200 percent of their R&D spending.  Beginning in January 2022, U.S. manufacturers lost the ability to deduct 100 percent of their R&D expenses in the year they were incurred.  The changes to the tax code now force companies to spread these deductions over five years, creating a massive tax increase at the end of the year and making investment in innovation more expensive.

“At a time of increasingly fierce global competition for research dollars, this change will make it harder for the next R&D dollar to be spent in the U.S., which will ultimately hurt future U.S. competitiveness,” said the letter signed by more than 400 companies and business organizations.

 

Union Vote Threatens to Upend Brokered Railroad Compromise

The Brotherhood of Maintenance of Way Employees (BMWE) announced that its members had voted down the tentative agreement its leadership reached with the railroads on Sept. 10, threatening to fracture the deal that Biden and his administration officials helped craft and was tentatively agreed to on Sept. 15. BMWE, the nation’s third-largest rail union, is one of three unions that had not yet voted on its proposed contract yet.

The contract BMWE members rejected was negotiated before the Sept. 15 deal and did not include additional concessions some unions had reached in talks with the administration. The BMWE argues that the freight industry’s drive to cut costs comes at the expense of rail workers, who suffer from unpredictable schedules and unrealistic attendance policies, with many workers wanting more paid time off.

BMWE could cause a rift among unions. So far, most unions have voted to ratify the agreement. The Sheet Metal, Air, Rail, and Transportation Workers-Transportation Division and the Brotherhood of Locomotive Engineers and Trainmen have yet to vote and have the same concerns about their benefits as BMWE does.

The potential strike would not occur until after the “cooling-off” period that ends in late November, avoiding a strike in the midst of the midterm elections. Still, timing is problematic, as the country is beset by economic concerns about inflation, a possible recession, and strained supply chains, all before the holiday shopping season. A strike would halt 40 percent of the nation’s freight, including food, animal feed, chemicals, oil and gas, and estimated to cost the U.S. more than $2 billion a day.

Union grievances are only a fraction of the problems stemming from the highly deregulated rail freight industry and the Surface Transportation Board’s (STB) limited authority to make needed changes to improve the ailing rail system. Shippers have been burdened with delays, poor service, and increased prices. The STB is working on several new rules to increase the board’s power, including one on reciprocal switching, but the process is slow. The STB plans to finalize the rule this year.

This spring, the STB began requiring the four Class I freight railroads to continue to set performance goals and provide weekly progress reports. However, the data shows mixed results, and shippers complain that the improvements are minimal. Railroads have increased their overall workforce by only 1 percent since May. Fulfillment orders to deliver loaded cars or pick up empty cars have only increased from 87 percent to 88.3 percent. One area with significant change, is the percentage of shipments arriving on time, which increased 11 percent from 64.8 to 75.8 percent in September. However, manufacturers and shippers say this increase in on-time performance has come at the expense of service cuts to customers.

 

House Chairs Launch Investigation into Mississippi Governor’s Distribution of Water Infrastructure Funds

House Committee on Oversight and Reform Chairwoman Carolyn Maloney (D-NY) and Rep. Bennie Thompson (D-MS), chairman of the Homeland Security Committee, have launched an investigation into Mississippi Governor Tate Reeves (R), who is accused of intentionally withholding federal funds to repair ailing water infrastructure in Jackson, MS. In an Oct. 17 letter to Gov. Reeves, the lawmakers question how the state plans to allocate more than $10 billion in federal funds from the American Rescue Plan Act (ARP) and the Bipartisan Infrastructure Law (BIL), including $429 million that was designated to enhance the state’s water infrastructure. They also ask the governor to include the communities’ racial demographics and population sizes for each of the allocations.

The lawmakers are troubled by the state legislature’s decision to distribute federal recovery funding on a matching basis, which “risks further perpetuating underinvestment in Jackson.” Currently, the state’s plan for distributing BIL water infrastructure funds this year does not include funding for Jackson and sets “arbitrary” caps on potential BIL funds to $500,000, preventing the city from receiving the estimated $1 billion needed to address its water system. The members asked if the state plans to lift this cap in 2023, and requested more information about other “special burdens” imposed on the city, including the “additional layer of review” that applications from the city of Jackson are subject to.

Jackson residents, a majority of whom are minorities, have been subjected to more than 300 boil waters orders in the past two years, highlighting a long-running dispute between city and state officials over funding to upgrade its decrepit infrastructure. This summer, residents were without safe and reliable drinking water for more than two weeks due to flooding caused by climate change.

Jackson city officials reported to Committee staff that the state has repeatedly sought to limit needed funding to Jackson to address its unsafe water systems. This included the state’s initial plan to exclude municipalities with more than 4,000 residents from competing for additional BIL funding.

The investigation comes at a time when the EPA’s Office of the Inspector General has launched its own probe of the city’s water crisis and is reviewing a Civil Rights Act complaint filed by the NAACP alleging that Mississippi violated the law by discriminating against Jackson on the basis of race in distributing federal water funds.

President Biden declared the Jackson water crisis a federal emergency on Aug. 30, ordering federal assistance to supplement Mississippi’s response. Congress provided $20 million in emergency funds to the city through the Army Corps of Engineers as part of a stopgap spending package passed late last month.