Priority Issues
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Priority Issues
The Davis-Bacon Act is a Depression-era law that requires the payment of the local prevailing wage - the wage paid to a majority of workers or the average wage in a given classification in given area - on all federally-funded construction projects. The Davis-Bacon wage rate is supposed to be based on the information gathered via voluntary wage surveys. In reality, due to inefficiencies and inaccuracies with this archaic program, the rates are often the local union rates and not the prevailing market wage rates.
As a federally-supervised law, Davis-Bacon also requires significant paperwork and reporting. Many smaller businesses avoid bidding for projects that include Davis Bacon requirements because of the added paperwork and reporting requirements. Davis-Bacon is an inaccurate, cumbersome system that adds more red tape and bureaucracy to federal contracts and prevents taxpayers from getting the best bargain on federal construction projects by eliminating true competition from the contracting process.
The Republican Study Committee has made repealing Davis-Bacon the first focus of a newly created Repeal Taskforce that will “work to eliminate U.S. federal laws that inhibit, restrict, or are otherwise harmful to the American public. The taskforce will focus on laws that are unconstitutional, anti-free-enterprise, or otherwise counter to economic, national security, or social conservatism.” The taskforce will be lead by Rep. Connie Mack (R-Fla.).
On April 6, 2011 the General Accounting Office (GAO) released a new report titled, “Davis-Bacon Act: Methodological Changes Needed to Improve Wage Survey.” The report concluded Department of Labor's (DOL) current wage survey method results in especially high or low prevailing wages for construction workers. GAO attributed the findings to several factors: a low number of contractors who respond to surveys; the long periods of time between wage surveys; and methodology for analyzing the surveys' results. The report revealed that 63% of prevailing wage determinations are based on collectively bargained rates despite the fact less than 14% of construction employees are union members. Perhaps most alarming was the finding that over 25% of the wage rates were based on six or fewer workers. The GAO recommended the DOL:
- Amend the requirement that the department issue wage rates by civil subdivision to allow more flexibility; in some cases wage determination could not be made for a county because of insufficient survey responses;
- Obtain expert advice on the survey design and methodology; and
- Improve the transparency of its wage determinations.
Status of Legislation: Several bills have been introduced that would repeal the Davis-Bacon Act. Representative Steve King (R-Iowa) has been a strong supporter of repeal and has introduced the Davis-Bacon Repeal Act (H.R. 745) and has also sponsored repeal amendments.
IEC Position: IEC supports efforts to repeal this outdated, inefficient law. IEC supports updating the federal prevailing wage so that accurate wage rates are obtained and the uncertainty and inefficiency is removed from the process.
Union-Only Project Labor Agreements
Union-only project labor agreements (PLAs) on federal contracts require that contracts be awarded only to contractors who agree to collective bargaining and union hiring. Union-only PLAs exclude a majority of the workforce from the opportunity to participate in federally-funded projects.
On February 6, 2009, President Barack Obama signed Executive Order 13502, which authorizes and encourages the use of union-only project labor agreements (PLAs) on federal construction contracts. President Obama’s order also repealed President Bush’s Executive Order 13202, which banned PLA’s on federal projects. On April 13, 2010, the Final Rule implementing Executive Order 13502 was published in the Federal Register.
Union-only PLA proponents argue that the agreements promote fair wages and labor peace through non-strike clauses. However, Davis-Bacon laws already ensure that the local, usually union, prevailing wage is paid on federal construction projects and merit shop employees do not go on strike. In reality, these agreements are about forcing merit shop contractors to submit to union rules and hiring halls if they want to bid on projects covered by a union-only PLA.
PLAs cost the American taxpayer more money by drastically limiting project bids to a small segment of the market that runs union-only shops. In a time when elected officials in both parties preach the doctrine of fiscal discipline, the expense of PLAs does not seem justified.
In 2010, according to the Bureau of Labor Statistics, nearly 87% of the construction workforce in the United States did not belong to a labor union. Not only do union-only PLAs waste taxpayer money, but they prohibit the large majority of the workforce, which has chosen not be a part of a union, from working on projects financed by their tax dollars.
Status of Legislation: The Government Neutrality in Contracting Act aims to preserve open competition on federal construction projects. Senator David Vitter (R-La.) introduced the Government Neutrality in Contracting Act (S. 119) on January 25, 2011. Representative John Sullivan (R-Ok.) introduced the House counterpart (H.R. 735) on February 16, 2011, and currently has 43 cosponsors. Specifically, S. 119 and H.R. 735 would “prevent discrimination against Federal Government contractors or their employees based upon labor affiliation or the lack thereof, thereby promoting the economical, nondiscriminatory, and efficient administration and completion of Federal and federally funded or assisted construction projects.”
IEC Position: IEC supports S. 119 and H.R. 735 and any effort to ensure open competition on federal construction projects. IEC opposes Executive Order 13502, and any legislation or other efforts that promote union-only PLAs.
The Secret Ballot Protection Act (SBPA) would protect the rights of an employee to a secret ballot during a union election. The SBPA would amend the National Labor Relations Act (NLRA) to make it an unfair labor practice for an employer to recognize, or bargain collectively, with a union that has not been selected by a majority of the employees in a secret ballot election conducted by the National Labor Relations Board (NLRB). In addition, it would be illegal for a union to cause or attempt to cause an employer to recognize or bargain collectively with a representative that has not been selected in such manner.
Currently, the NLRA requires a government-supervised secret ballot election to recognize a union as a collective bargaining unit once the union has collected authorization cards signed by 30% of the employees. An employer may also choose to recognize the union based on presentation of a majority of employee-signed union authorization cards.
Voters in four states (Arizona, South Carolina, South Dakota, and Utah) have passed state constitutional amendments guaranteeing workers a secret ballot. The NLRB initially threatened the four states with a lawsuit because it claimed the amendments conflicted with federal labor law and that federal law trumps the states on this issue. The NLRB has now suing two of the states, Arizona and South Dakota, and has not ruled out future action against South Carolina and Utah.
Status of Legislation: The House (H.R. 972) version of the Secret Ballot Protection Act was introduced by Representative Phil Roe (R-TN) on March 9, 2011, and currently has 19 cosponsors. The Senate (S. 217) version was introduced by Senator Jim DeMint on January 27, 2011, and currently has 23 cosponsors.
IEC Position: IEC strongly supports H.R. 972 and S. 217 and any effort to guarantee employees the right to a secret ballot.
3% Witholding on Government Contracts
In an effort to increase tax compliance by contractors working with the federal government, a 2005 tax cut included a last minute provision to implement a 3% withholding starting in January 1, 2012. Section 511 of the Tax Increase Prevention and Reconciliation Act of 2005 (P.L. 109-222) requires any local government entity, with annual revenues in excess of $100 million, to withhold three percent of total contract payments until contractors have proven that their taxes are paid in full. This move could be crippling to smaller business that typically operate on smaller profit margins.
While this provision will not take effect until 2012, the issue was accelerated by some in Congress who would like to move the effective date up to fund other congressional initiatives. The 3% withholding law, which was enacted in Section 511 of the Tax Increase Prevention and Reconciliation Act of 2005 (P.L. 109-222) as Section 3402(t) of the Internal Revenue Code, mandates that federal agencies, states, and certain local governments withhold 3% of nearly all of their contract payments, Medicare payments, farm payments, and certain grants. Compliance with this law will impose significant, unnecessary financial burdens on both the public and private sectors.
The withholding is a flat percentage of revenues from government payments and will restrict cash flow needed for day-to-day operations and investments. In addition, the administrative and capital investment costs that compliance with 3% withholding will impose on businesses and governments will be substantial, and the mandate will be exceedingly complicated to implement. Three percent withholding will be especially burdensome for small businesses that might not have the resources needed to comply with this provision.
Status of Legislation: S.89, S. 164, and H.R. 674 have been introduced in order to repeal the 3% withholding tax on federal contracts.
IEC Position: IEC supports efforts to repeal this provision, including S. 89, S. 164 and H.R. 674.
Special interest groups and the White House Middle Class Task Force are advocating for federal regulations that would give preferences to employers whose pay and benefit packages meet new “high road” standards. This proposal is similar to the blacklisting regulations that were pushed by the Clinton Administration. Politicians and interest groups could use the “high road” standards to blacklist employers who do not run every facet of their business the way the government wants.
The proposal would benefit contractors who provide hourly workers with a “living wage,” health insurance, an employer-funded retirement plan, and paid sick days. Contracting officers would weigh a company’s labor policies as criteria for awarding the contract, along with the standard metrics: price, past performance, and the ability to meet the contract’s requirements.
Numerous federal laws and regulations, including the Davis-Bacon Act, the Service Contract Act, and the Federal Acquisition Regulation Council (FAR), already set standards and guidelines for federal contractors.
Status: The Obama Administration has not introduced an executive order or formally proposed a regulation related to the “high road” proposal. However, the ranking members of the House and Senate Government Oversight Committees, Rep. Darrel Issa (R-CA) and Senator Susan Collins (R-ME), respectively, have separately written the Administration to discourage them from moving forward with a “high road” proposal.
IEC’s Position: IEC opposes these needless regulations, whose only purpose would be to steer federal contracting dollars to a small percentage of the employer community that happens to be well-connected politically, at the expense of good, law-abiding employers.
The federal estate tax, commonly referred to as the Death Tax, is a tax on the estate of a deceased person. Essentially, taxpayers are paying double taxes as they build their estate and then again as they pass it on to the next generation. The Death Tax acts as a major hurdle, if not outright barrier, to passing down family owned small businesses to future generations.
As part of the 2001 Economic Growth and Tax Relief Act, the threshold amount at which the Death Tax is applied was increased and the tax rate was decreased, with outright repeal of the tax in 2010. The repeal of the tax was set to sunset after just one year, with the death tax going back into effect at the 2001 levels starting in 2011. As part of a larger tax package signed into law in December 2010, the death tax was re-instituted for 2011 and 2012 at a top rate of 35% and an exclusion amount of $5 million.
The threat of the death tax forces families to pay for costly estate planning or possibly even selling some the business’ assets in order to ensure they are able to keep the business in the family. Permanently repealing the death tax would allow family business owners to focus their resources on growing their business and creating jobs.
Status of Legislation: Several bills (H.R. 177, H.R. 1259) to make repeal of the Death Tax permanent have been introduced in the 112th Congress.
IEC’s Position: IEC supports legislation to permanently repeal of the Death Tax.