The changes of the new policy landscape that stakeholders should be monitoring in 2021.
There have been a big number of changes in Washington D.C., in a short amount of time since President Biden was inaugurated and the 117th Congress was gaveled into session earlier this year. Not surprisingly, policy agendas have dramatically shifted with a Democrat in the White House and Democrats controlling the Senate. Stakeholders would be smart to analyze the new policy landscape (and should have probably done so already) to determine how risk and opportunity has changed given new political leadership.
Corporate Tax Rate Increase: President Biden has prioritized, in part, increasing the corporate tax rate from 21% to 28%. This tax increase would raise revenue to help fund other priorities. While this change to the tax code (and potentially other changes that would accompany such a proposal) would not be able to move through the Senate under regular order, Democrats have the ability to include a tax increase within a second reconciliation package – effectively avoiding the 60-vote threshold needed for most bills. Since this was the foundation of the President’s tax proposal on the campaign trail and could provide needed revenue, this will be a top priority this year. While the risk is real, it is not clear whether all Democrats would get on board, which would be needed to get this over the finish line.
Minimum Wage Increase: Many businesses took a sigh of relief when a $15 minimum wage increase was effectively rejected in the Senate. It reminded all policymakers that procedural hurdles may have effectively ended Democrats’ hopes of passing a $15 minimum wage increase this Congress. However, the minimum wage debate is far from over in DC. In addition to adoptions of minimum wage increases expanding among states (including the politically red state of Florida recently passing a $15 minimum wage), policymakers on both sides of the political aisle are looking at potential compromises.
While the President continues to insist on $15, there is a lot of activity highlighting that a compromise may be possible – most notably a handful of Democrats recently opposing the $15 minimum wage proposal and new legislation introduced by Senator Romney (R-UT) and Senator Cotton (R-AR) to increase the minimum wage to $10 per hour. Do not be fooled by the headline that minimum wage is dead; this issue is likely not going away.
Federal Data Privacy Reform: Prior to the COVID pandemic, both chambers had bipartisan efforts to finalize legislation that would create a data privacy law, which was spurred by aggressive state laws being developed (most notably in California) and a new law in the European Union. The pandemic has only brought privacy policy more into the spotlight and, despite the political shifts, policymakers remain very motivated to reach a bipartisan and bicameral agreement on privacy legislation. Most companies will view the concept of federal policy legislation to be a big priority (assuming it would pre-empt state law), but there are some significant issues that remain outstanding that need to be resolved, which would have significant impact on the business community.
Supply Chain and Trade: While there continues to be a significant level of trade fatigue on Capitol Hill, the emerging discussion around domestic manufacturing and onshoring driven by the Biden administration will spur potential shifts in policy. The ongoing uncertainty around the future of 301 tariffs is likely not to be resolved in the near-term, although a recent announcement about a limited scope of of exclusions provides some hope that there could be adjustments at some point. Additionally, an effort to create resiliency within the supply chain (in response supply chain disruptions throughout COVID), largely prompted by a recent Executive Order, will likely lead to policies related to incentivizing domestic manufacturing. These two issues – supply chain and trade – will guide the administration’s policy focus around Made in America and domestic manufacturing and both will be important to watch closely, especially for organizations that rely on supply chains overseas.
Labor: The new administration has certainly provided organized labor a seat at the table that has not been there over the last four years. President Biden’s policy agenda – from domestic manufacturing and minimum wage to infrastructure and international trade – is being heavily influenced by organized labor. The President removed the General Counsel of the National Labor Relations Board (NLRB) and replaced the Chair on his first day in office. After the term of one NLRB member ends in August, the NLRB will have a majority of Democratic members. While some legislative priorities, including the Protecting the Right to Organize Act (PRO Act), are unlikely to advance through the Senate, the NLRB and the Department of Labor is expected to heavily influence policy, regulations, and enforcement within this area. Expect policies involving workers and unions to closely align with the priorities of organized labor going forward.