MCAA Legislative Conference
A Successful 2011 Legislative Conference
The MCAA held its annual Legislative Conference in Washington, D.C., May 10-12. About 45 people attended this year’s conference, which is one of the larger turn-outs at the conference in years. A new addition to this year’s conference: We had about a half-dozen South of 40 members participating. By Thursday afternoon, our 45 participants had visited more than 100 Congressional and Senate offices to discuss issues of our industry. Of these 100 offices, we saw about 50 Congressman or Senators, plus their staff members.
Some of the issues our group expressed concern over included:
Military Construction (MILCON) – The U.S. Army Corps of Engineers (USACE), faced with limited funding for military construction (MilCon) and charged with staying abreast of a rapidly transforming military, is favoring low initial cost construction. Durability and maintainability are being sacrificed, and the long-term implications of operating, repairing and prematurely replacing these facilities are very costly indeed. Modular and “stick” constructed buildings with 15- to 20-year service lives are being constructed where masonry facilities with 50-plus-year design should be an option. The downstream (life cycle) cost implications to the government are enormous.
The Hidden Tax on Small Business – 3% Government Withholding Tax – The Masonry Industry opposes a provision included in the 2005 tax reconciliation bill (Section 511 of the Tax Increase Prevention and Reconciliation Act of 2005) which would require federal-state-local governments to withhold 3% of payment due to government service providers. This provision, effective in 2011, affects payments for goods and services under government contracts as well as payments to any person for a service or product provided to a government entity. This presents a particular problem for small businesses in an industry such as construction which is extremely competitive. The 3%, subject to government withholding represents the estimated profit or operating cash flow on a construction project. This 3% could be used by contractors to compensate for material costs, supplies, and other operating expenses; instead, construction contractors will in essence be “floating” the government a 3% interest free loan. This withholding provision applies to the total contract, not to the net revenue generated from the project which unfairly penalizes construction contractors. For example, on a $1 million dollar project, $30,000 will be withheld from payment. If the contractor is fortunate enough to achieve a 4% profit, $40,000 will be realized before paying for supplies, services, and other business expenses. Tax generated on the $40,000 is $14,000 (35% of $40,000). The government has (over)-withheld $30,000 for only $14,000 in tax obligations.
Misclassification of Employees as Independent Contractors – Some contractors in the construction industry are deliberately misclassifying workers as independent contractors rather than employees to avoid payroll taxes, insurance premiums and other employment expenses on order to boost company profits. This practice grossly undercuts honest, law abiding contractors and, in addition, deprives the federal, state, and local governments of millions of dollars in revenue.
Alternative Minimum Tax – The Individual Alternative Minimum Tax (AMT) operates parallel to the regular income tax, with different rates and definition of income and deductions. Although the AMT has historically applied to few taxpayers, the tax will grow rapidly over the next decade under current law. By 2010, the AMT will affect 33 million taxpayers – about one-third of all tax returns, up from 1 million in 1999. Last year, Congress approved a “patch” for the AMT. The patch increased the AMT exemption, which is basically a standard deduction for taxpayers hit by the alternative minimum tax. The masonry industry supports repeal of the AMT or appropriate indexing of the AMT to its original date of enactment or the date of enactment of the new AMT bill.
In addition, several groups discussed concern over union pension obligations and general economic concerns. For the most part, all the meetings were well received, and most of our concerns were heard. We are confident that we will make significant headway on at least two of our four major issues this year.
The MCAA also presented our annual Freedom and Prosperity awards. The recipients of the awards this year were Con. Heath Shuler (NC), Con. Paul Ryan (WI), Sen. Mark Pryor (AR) and Sen. John Cornyn (TX). You can learn more about these recipients in the “Government Affairs” column on p. 10 of this issue. We are thankful to our recipients for their support of small business concerns throughout the past year. For a full description of all MCAA position papers, please go to www.masoncontractors.org, click “legislative,” and then choose “position papers.” If you are interested I attending future conferences, please feel free to contact the MCAA office, so we can contact you in 2012.
Mark Kemp, Jeff Buczkiewicz, Congressman Joe Walsh of Illinois, and Jim O’Connor.