This article looks at what concerns distributors most about the upcoming election, as noted in a recent MDM survey. In addition to the survey, MDM spoke with distributor associations that are playing an active role in educating and speaking for their members on critical topics in Washington DC.
While the election does not directly determine laws and regulations, the winners of the races – from the President down to local contests – will play a role in the country’s direction for the next several years.
It’s important for distributors to make sure their voices are being heard.
And it’s important for “everyone to do a little bit of homework” on where the candidates stand, says Jon Melchi, director of government affairs for Heating, Airconditioning & Refrigeration Distributors International.
“There are a lot of big decisions that are going to have to be made in the next two years,” he says. “It’s important that people are aware of these decisions and what they might do.”
In a recent survey conducted by MDM and Robert W. Baird & Co., respondents were asked to list the top two business issues they had related to the election. The top response, at 37.7 percent, was taxes, but that single word covers a lot of ground. “There are so many layers to that onion,” Melchi says, from increases in personal income taxes to the estate tax.
The tax increases that will take effect at the end of year if no action is taken are “immense,” according to Jade West, senior vice president-government relations for the National Association of Wholesaler-Distributors. The impact is broad. Hundreds of small businesses that file under the personal income tax laws as Sub S corporations could see significant hikes in their rates, and as a result are “sitting on capital,” West says.
“They won’t move because they don’t dare. They don’t dare because they don’t know what their tax burden will be in January, they don’t know what their regulatory burden will be in January,” she says. “…So they’re doing nothing until we get past that position of simply not knowing.”
Survey respondents agreed. “It is better to stay with what I have in place until I have a better idea of what I will be paying,” one respondent wrote.
The estate tax – an important issue for many small, family-owned business – also is scheduled to revert back to a $1 million exemption – which is “horrifically low,” Melchi says – and a 50 percent rate at the end of the year.
“It really is a tax free-for-all,” says Edward M. Orlet, vice president of government affairs for the National Association of Electrical Distributors. “Nobody really knows what’s going to happen.”
Other tax concerns include increases on investment income and the expiration of the payroll tax holiday, which may not have much of an impact on businesses directly, according to Orlet, but will impact employees – and has the potential to become a part of the “cutting deals” process, he says.
Rising Cost of Health Insurance
Another top issue from the MDM/Baird survey was the rising cost of medical insurance. “Health care costs continue to rise,” wrote one respondent. “Not sure the election – regardless of outcome – will curtail this trend.”
Some of the cost increases related to health insurance are being tied to new regulations within the Affordable Care Act – commonly referred to as Obamacare. But the upward trend began long before the act was introduced.
According to the Kaiser Family Foundation’s 2012 Employer Health Benefits annual survey, average insurance premiums increased 3 percent for single coverage and 4 percent for family coverage last year. Compared with prior years, these increases are relatively low; however, since 2007, the average family premium has increased 30 percent.
That said, uncertainty about the long-term impact of the new regulations in the ACA continue to weigh on business owners. “The unknown of how it affects our business is frustrating,” says one survey respondent.
Few provisions in the ACA are scheduled to go into effect in 2013, but business owners and executives should make sure they are in compliance with current regulations and prepared for the new provisions in 2014.
“The word of the day – of the month – is uncertainty,” Orlet says. And while taxes and health care topped the list of concerns for distributors, several other items fall under that umbrella of uncertainty, as well.
Concerns over the general regulatory environment – from EPA regulations to actions by the National Labor Relations Board – have many business owners wondering how to respond.
However, this election may have little impact on the actions by those agencies, West says. “The boards are appointed independent of the election,” she says. What’s more, their terms tend to be staggered, meaning appointment times vary.
“A lot of the blame is placed upon the regulatory bodies, and certainly they are part of the problem,” Melchi says. “But Congress has punted a lot of the authority to these regulatory agencies … and abdicated some of its authority for oversight.”
Many businesses would like to see regulatory reform, which is where this becomes an election issue, Melchi says. Congress needs to take some of that authority back, for example through the REINS Act which would require “an up-or-down vote on any major regulation” proposed, he says.
The general health of the U.S. economy and global economy were also top concerns raised by survey respondents.
What You Can Do
One of the hallmarks of this – and almost any – election cycle is the level of hyperbole that candidates are engaging in, West says. “It really can be difficult to figure out where candidates really stand on any given issue.”
That doesn’t mean you shouldn’t be acting. “Do not assume that Congress knows what you need,” she says.
Studies have shown that employees want to hear from their employers about issues, Melchi says. “You can’t tell them who to vote for, but you can help educate them on how the issues would impact your business,” he says.
Don’t wait until you have a complaint about something to start connecting with your congressional delegation, Orlet advises. “Distribution is a relationship business,” he says. “So is government advocacy. You can’t build a relationship in one day or with one phone call.”
Offer to host your representative or a candidate for an on-site meeting, provide them with a firsthand view of what your needs are and how policies may impact your business.
Associations often have information on candidates available on their websites, such as HARDI’s legislative scorecard or the National Association of Manufacturers Voter Guide.
And similar information can be found year-round through those associations or organizations like the Small Business Legislative Council or the National Federation for Independent Business.
“Oftentimes progress is made without seeing results right away,” Melchi says. “But if you keep talking about it, and keep educating people, they’re more willing to stay engaged and stay a part of the process.”