Republicans tout tax law success in hearing on energy sector impacts
A House Energy subcommittee hearing Wednesday on the "Benefits of Tax Reform on the Energy Sector and Consumers" yielded a partisan recital of the pros and cons of the tax bill passed last December.
Subcommittee Republicans elicited responses from witnesses from the small business community about hiring new employees and buying new equipment as a result of tax overhaul.
- Democrats exclusively called on Seth Hanlon, senior fellow at the Center for American Progress, to testify on beneficiaries of the tax law, who he said were overwhelmingly the wealthiest Americans and not the middle class.
Republicans had hoped to gain significant political capital from the tax bill passed last December. But while support for the law is increasing, more people remain opposed to it than favor it. On Wednesday, Republicans made their case for the benefits of the law, ostensibly for the energy sector, reciting anecdotal evidence from their districts.
They also called on several witnesses to further their outlook.
Sam McCammon, president of Anamet Electrical, a manufacturer of flexible electrical conduit based in Matoon, Ill., told the subcommittee he gave his employees a 3% wage increase. He also said the company is planning to increase its capital expenditures by more than 100% in 2019 — both as a result of the lower corporate tax rate and changes in limits to the deductibility of capital investments that came out of the tax bill.
Tom Ferguson, CEO of AZZ Inc., a provider of galvanizing, welding solutions, and specialty electrical equipment based in Fort Forth, Texas, told the subcommittee the tax bill "leveled the playing field with our global competitors," yielding an expected 15% increase in growth. As a result of the brighter business prospects, Ferguson said AZZ distributed $1 million in special bonuses to high performing employees, gave wage increases of $1 to $4 per hour to about 1,000 of the company’s lowest paid employees, and established a $750,000 reward program for employees. "I’m investing in my business, employees, and my community and also know that many others are as well," he said.
Democrats on the subcommittee had a different view, calling on Hanlon to testify about the negative effects of the tax law. He said it's "failing to fulfill the promises it made" to provide benefits to the middle class.
"Early indications are that [the tax law] is functioning as critics predicted," Hanlon said. It is resulting in a record level of corporate share buybacks totaling about half a trillion dollars to date and many of the benefits will be erased because of higher healthcare premiums due to changes in the Affordable Care Act.
Hanlon also said "American workers haven’t gotten the raise they were promised," citing Bureau of Labor Statistics data showing that hourly wages were down slightly.
On Monday, Moody's Investors Service had lowered its outlook on the U.S. regulated utility sector to negative for the first time since it began conducting sector outlooks. Moody's said that while the tax code boosted earnings and lowered tax liabilities for many companies, the lower corporate taxes will result in lower cash flows for utilities and higher debt ratios.
Several Democrats called into question the premise of the hearing, noting, among other things, that the energy subcommittee does not have jurisdiction over tax issues.
"This hearing is nothing but a blatant attempt by the Republican majority to tout its unpopular tax scam in the hope that middle class Americans, who are not seeing any substantial benefits from the new law, might just reconsider their position. I would not bet on it," Rep. Frank Pallone, D-N.J., said.
Democrats repeatedly noted that the benefits from the tax overhaul would be largely offset by higher healthcare premiums and what Pallone said are higher gasoline prices "thanks in large part to [President Donald] Trump’s reckless Middle East policies."
Rep. Jerry McNerney, D-Calif., cited a survey of market analysts by Morgan Stanley that found 70% of tax cut savings would go to shareholders and only 13% would go to pay-raise benefits and employee benefits.
Both McCammon and Ferguson also cited unfinished business in the tax law — a concern also raised in a letter filed with the subcommittee that provided perhaps the most relevant testimony for the energy sector.
In the letter, the National Hydropower Association, the American Biogas Council, the Biomass Power Association and the Energy Recovery Council said "tax credits for renewable baseload power resources … remains unfinished."
"The production and investment tax credits (PTC and ITC) for our industries have lapsed, while the credits for other renewable resources, such as wind and solar — industries with which we directly compete — have long‐term extensions," they wrote. That "puts development of our resources at a severe competitive disadvantage in the market for new renewable electricity generation," they said.
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