The Legislative Outlook for 2005

Date: Dec 01, 2004

With the 2004 elections over, Congress returned November 16 to finish up some appropriations bills, raise the debt ceiling, and handle other unfinished business, including the transportation bill and the intelligence reform bill that incorporates recommendations of the 9/11 Commission.

While most agree moral issues played a role in the 2004 election results and thus will figure prominently in legislative initiatives during the next session of Congress, we examine here what members of the converting industry may expect in terms of the legislative business agenda for the 109th Congress beginning in January 2005.

From a business perspective, the President's announced priorities for legislative action include making the tax cuts permanent and reforming the Internal Revenue Code, tort reform, reforming Social Security, and health care reform. Energy reform, a major legislative priority from the last term that failed to gain any consensus in Congress, will again be on the table, and business continues to seek simplification of environmental laws.

At the same time, a just-announced report on the impact of global warming in the Arctic region, coupled with the agreement by Russia to sign onto the Kyoto Protocol, is sure to keep environmental issues on the table.

The war on terror and the war in Iraq occupy much of the foreign policy agenda and also will be a major factor influencing budget discussions.

Tax Reform. The President's major initial goal will be to make permanent the tax cuts passed this session. Those reforms included limiting the tax on dividends and capital gains and capping the tax rate for the highest earners. Permanently eliminating the estate tax will be on the agenda, a key issue for entrepreneurs and family businesses. Tax breaks for small businesses also have been discussed as a way to promote entrepreneurship.

Tort Reform. Despite a strategy of focusing on a narrower set of objectives, such as limiting non-economic damages in medical malpractice suits, tort reform failed to make headway in the 108th Congress. Bills for medical malpractice reform, class action reform, asbestos liability reform, limits on liability for gun manufacturers, and limits on obesity lawsuits were introduced but not passed. Tort reform remains a controversial and polarizing issue.

In the next session of Congress, tort reform measures may be more successful, and they remain a major business priority. For some sectors that have succeeded in getting tort reform initiatives passed at the state level, one challenge will be to make sure these protections are preserved in any federal legislation.

Social Security and Health Care Reform. One theme for Social Security reform has been the notion of Retirement Savings Accounts (RSAs), designed to offer more control of retirement savings by citizens. With health savings accounts (HSAs) now available, the Administration would like to expand them by offering possible tax incentives (an approach potentially at odds with tax simplification objectives). Association health plans (ASPs) are another possible tool favored by the President. Reform will require a strong bipartisan effort.

Energy and the Environment. The high cost of oil and the need for energy security remain key issues. Simplifying paperwork requirements and modifying environmental laws are favored by the Administration, which for about two years has supported expanding the use of environmental management systems.

The Clear Skies Initiative and the energy bill that failed this session are expected to be back on the table. One of the biggest challenges to global businesses may come from the anticipated entry into force of the Kyoto Treaty now that Russia has ratified it. As nations implement cuts in global warming emissions, trade impacts loom large.

The Budget. In 1998 the Supreme Court overturned legislation authorizing the line-item veto. The Administration is evaluating legislative options to offer this authority. The expanding deficit, fueled by the costs of the war, homeland security, Medicare, and Social Security, will affect the discussions about reform of entitlement programs such as Social Security and Medicare.

Potentially divisive social issues and judicial nominations likely will take significant time on the legislative calendar. Thus, it is important for members of the converting industry to consider their legislative priorities and begin laying the groundwork with their elected representatives.

Reproduced with the permission of Paper, Film & Foil CONVERTER magazine (312.726.2802). Copyright © 2004 by Intertec Publishing. All rights reserved.

Sheila A. Millar, a partner with Keller and Heckman LLP, counsels both corporate and association clients. Contact her at 202/434-4143; millar@khlaw.com.