Blue Crush

With Democratic White House and Congress, retailers anticipate taxing times

Published in CSP Daily News

By  Samantha Oller, Senior Editor/Special Projects Coordinator

WASHINGTON -- The results of the Nov. 4 election-a president-elect Barack Obama and larger Democratic majority in Congress-came as little surprise to many in the industry. "I think [Senator John] McCain got beaten because he was associated with [President George W.] Bush and people were upset with Bush," Jay Ricker, president of Ricker Oil Co. Inc., Anderson, Ind., told CSP Daily News. "People were ready for change. I don't think there was any question in people's minds that the biggest No. 1 issue is the economy."

"It's just an amazing time that we've had so [image-nocss] many adversities as a country, so clearly we created a climate for change" agreed Bill Douglass, CEO of Douglass Distributing Inc., Sherman, Texas. "We're actively fighting terrorists in two countries. We have an unprecedented meltdown in federal housing, which then triggered a liquidity crisis that revolved around our subprime mortgages. Then that was compounded with running the speculators out of the petroleum market when these various trading houses collapsed. Then in September, the stock market reacted to all of this and melted down. So no candidate, whether incumbent or not, has ever faced this many significant changes."

"From a political side, this is clearly close to the perfect storm," said Douglass. "Obviously, it overwhelmed the incumbent party."

What retailers do worry about, however, is how an Obama White House and Democratic Congress will tackle the storm of challenges, namely the economy. From Ricker and Douglass' points of view, this can be summed up in two words: higher taxation. Both cited president-elect Obama's plan to raise taxes on those with incomes over $250,000, a move they fear will curb economic growth when it is needed most.

"I think people in our business are going to [say], if I'm going to pay taxes and not get any of them back, why should I grow my business, and spend money in many cases?" said Ricker. "I think it will have a chilling effect on investment, if it's considered to be an onerous tax on higher incomes."

Beyond taxation, there are several other areas where the industry can expect to see quick action from the new Congress, said John Eichberger, vice president of government relations for the National Association of Convenience Stores (NACS):

Card-check legislation. "You're going to see a much more favorable tilt toward unions, so card-check legislation will be one of first things [Obama will] sign into law," said Eichberger, referring to the Employee Free Choice Act, pending legislation that would allow employees to organize into a union simply by signing a card, instead of partaking in a secret-ballot election.

Increased tobacco taxation. The twice-vetoed State Children's Health Insurance Program (S-CHIP) bill, funded by an increase in the federal excise tax on tobacco, will likely be among the first three pieces of legislation a President Obama signs into law, Eichberger predicted.

Windfall profits taxation. "You will see a pretty strong move to enact windfall-profit taxes on the large integrated oil companies-which, that kind of policy will have a trickle-down effect on our industry," said Eichberger. "It will be passed through in higher costs, probably compromise production-it'll resonate."

Credit Card Fair Fee Act. The pro-regulatory environment will likely supercharge efforts at passing this legislation, which has had bipartisan support in the current Congress. "Democrats have been a friend on that issue on Capitol Hill-it may make it easier in that respect to get it passed," said Ricker, who also serves as NACS vice chairman of convention and events.

FDA regulation of tobacco. H.R. 1108, the Family Smoking Prevention & Tobacco Control Act, which passed the House in July, and is being taken up in the Senate, will move forward. Its House sponsor, Representative Henry Waxman (D-Calif.), has assured NACS that the provisions designed to protect retailers, negotiated at the House level, will remain in the Senate bill. And, should it pass, it will be signed. "It didn't matter if it was an Obama or McCain in the White House," said Eichberger. "Any one would sign the bill if it got to them."

Renewable fuels push. "Obama is much more favorable on subsidies for renewables than McCain was," noted Eichberger, "so you will see a more aggressive push for alternative fuels, alternative energy in general, which will raise the bar for the industry in general and NACS to educate legislators as to how implementation of these things will actually work, and what things need to be done to make it possible."

Climate-change legislation. Waxman is challenging Rep. John Dingell (D-Mich.) for the chair of the House Energy & Commerce Committee. Should he succeed, Eichberger said he expects that the current House bill addressing climate change, which is kinder to the automotive industry, will be scrapped, to be replaced with one that is more focused and aggressive-and in line with president-elect Obama's goals. "The requirements on fuel efficiency and tailpipe emissions will be re-opened and that could lead to significant change in fuel formulations as well," said Eichberger.

Of all of these, Eichberger predicted that the card-check legislation, federal excise tax increase and changes to estate death tax, capital gains tax and windfall profit tax will definitely be seen in 2009, with the latter as part of an economic stimulus bill. Meanwhile, climate-change legislation will likely take much longer to draft and is not foreseeable for 2009.

Meanwhile, the industry lost a few friends in the congressional election. Eichberger cited Rep. Ric Keller (R-Fla.), who has been a close ally on credit-card interchange legislation, and who lost his seat. In the Senate, Sen. John Sununu (R), who lost his seat in New Hampshire, "has always just been a very sensible legislator," said Eichberger. Fortunately, he observed, Democrats were unable to reach the filibuster-proof 60-seat majority in the Senate.

"In general, the dynamics have changed a little bit-but there is still some hurdles they have to overcome to move legislation, which in our system, is the way it's supposed to be," he noted. "By not having 60 votes for one party over another, that check/balance is preserved."

By Samantha Oller, Senior Editor/Special Projects Coordinator
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