The first question posed to Sen. Charles Grassley (R-IA) at an NAM-sponsored event in Pella, Iowa, on Wednesday dealt with the National Labor Relations Board’s complaint against The Boeing Company for locating new production facilities in South Carolina instead of Washington state. (For more on the event, see The Journal Express, “NAM presents Grassley with legislative excellence award.”)

Sen. Grassley responded with sharp criticism, saying, “”If the law lets the NLRB do this, then we need to change the law.”

It’s an important “if.” In filing its complaint against Boeing for locating a new production line for the 787 Dreamliner plane in South Carolina, the NLRB had to ignore 45 years of the board’s own precedent, which clearly established an employer’s legitimate interest in mitigating the impact of strikes. The U.S. Supreme Court reaffirmed that interest in two cases, American Ship Building Co. v. NLRB, 380 U.S. 300 (1965) and NLRB v. Brown, 380 U.S. 286 (1965)].

An Administrative Law Judge has scheduled a June 14 hearing on the NLRB’s complaint, which was filed by the board’s acting general counsel, Lafe Solomon, at the instigation of the International Association of Machinists and Aerospace Workers. The NLRB could eventually hear the case and court proceedings are certainly possible, despite the complaint being “legally frivolous” as Boeing characterized it in a tough statement after the Solomon’s action.

But what if? In a very helpful review of the law, the National Review’s Robert VerBruggen describes the vague and poorly written National Labor Relations Act and the process now facing Boeing. (continue reading…)

From The Waterville Morning Sentinel, “Sen. Collins receives awards at New Balance factory“:

NORRIDGEWOCK — When New Balance factory employees looked up from stitching, stamping and assembling hundreds of athletic shoes on Monday, they saw an uncommon sight: Republican U.S. Sen. Susan Collins walking between the rows of industrial sewing machines with a trail of staff.

Wearing her brown-and-tan New Balance sneakers, Collins shook hands, asked questions, posed for photographs and learned about new projects at the only athletic shoe company that still produces footwear in the United States. 

She was at the 353-employee facility on Depot Street not just to learn about the two-week-old option for customers to personalize their shoes with specific colors, laces and logos, or to learn about a developing project to make water-friendly shoes for the Navy SEALs, a special operations force.

Collins was at the New Balance plant to receive the Award for Manufacturing Legislative Excellence from the National Association of Manufacturers honoring the Senator’s support for manufacturing in the 111th Congress. Specifically, a member must be in line with NAM identified “Key Votes” 70 percent or higher to qualify for the award. (See our 111th Congress Voting Record Guide for the full rundown.)

The NAM’s Public Affairs shop has had an extraordinarily busy winter and spring organizing the award events, traditionally hosted in local communities by NAM member manufacturing companies. The awards are important, but so is the opportunity for elected officials to see a manufacturer in operation and talk to employees.

On Wednesday, NAM President Jay Timmons and NAM Board Chairman Mary Andringa will be at the Vermeer plant in Pella, Iowa, to present the NAM’s award to Sen. Charles Grassley (R-IA). On Friday, the NAM honors Rep. Rodney Frelinghuysen (R-NJ) at an event hosted by Sanofi Aventis in Bridgewater, N.J.

By the way, those New Balance shoes are pretty cool. Design your own New Balance custom US574 shoe here.

Rep. Lamar Smith (R-TX), the chairman of the House Judiciary Committee, and Sen. Charles Grassley (R-IA), the ranking Republican on the Senate Judiciary Committee, today introduced an important piece of civil justice reform, the Lawsuit Reduction Abuse Act.

The House bill is H.R. 966 (text).

From the joint news release:

The Lawsuit Abuse Reduction Act (LARA) imposes mandatory sanctions for lawyers who file meritless suits in federal court. Federal rules mandating sanctions for frivolous suits were watered down in 1993, resulting in the current crisis of widespread lawsuit abuse. LARA restores the mandatory sanctions which hold attorneys accountable for lawsuit abuse.

Specifically, the legislation:

• Reinstates the requirement that if there is a violation of Rule 11, there are sanctions (Rule 11 of the Federal Rules of Civil Procedure was originally intended to deter frivolous lawsuits by sanctioning the offending party).
• Requires that judges impose monetary sanctions against lawyers who file frivolous lawsuits. Those monetary sanctions will include the attorney’s fees and costs incurred by the victim of the frivolous lawsuit.
• Reverses the 1993 amendments to Rule 11 that allow parties and their attorneys to avoid sanctions for making frivolous claims by withdrawing them within 21 days after a motion for sanctions has been served.

The House Judiciary Subcommittee on the Courts has a hearing scheduled on the bill at 10 a.m. Friday, March 11. Victor Schwartz, general counsel for the American Tort Reform Association, will be one of the witnesses, ATRA reports.

Sen. Charles Grassley’s floor speech Monday on S. 3816, the Raise Taxes on Successful U.S. Businesses with Overseas Operations Act, provided a thorough, historical discussion of the U.S. tax system’s treatment of foreign income, as noted before.

Grassley, the ranking Republican on the Senate Finance Committee, also offered his views on the payroll tax holiday, a two-year tax break for some small businesses financed by a permanent tax increase on others. And he asks the key question: Why is the Senate debating this when taxes on small business are going to rocket higher when the 2001 and 2003 tax rates expire at the end of the year.

This provision only scores, according to the JCT, as costing $1 billion.  So, let’s make sure we are clear on this point – the other side is seriously considering raising taxes on small businesses – the lead creator of jobs – by tens of billions of dollars by letting top individual rates go back up in 2011, but, in an effort to support job creation, they offer up this $1 billion payroll tax holiday? 

According to the Joint Committee on Taxation, 50% of small business flow-through income will be hit by a marginal tax hike of 17 to 24%.  That tax increase is scheduled to hit these job-creating small businesses in a little over three months.  Finance Committee Republican tax staff calculate the effect of that tax hike to be 50 times the benefit provided by this bill.  On our side, we don’t see the logic of raising $50 in taxes and providing a complicated tax benefit of $1. 

Why aren’t we dealing with the real problem, for the folks responsible for creating 70% of America’s jobs.  I’m talking about a time-out on the tax hit that’s coming to those small businesses.  That’s what we ought to be debating here on the Senate Floor. 

Agreed.

The Hill, “Democrats not optimistic ahead of Senate vote on outsourcing bill,” which suggests an attitude of, “We know it’s a bad bill, we know it won’t pass, but what the hey…”

Notably, revenues measures  must originate in the House of Representatives — Article I, Section VII, U.S. Constitution – and this bill did not.

The cloture vote is scheduled for 11:30 a.m.

Sen. Charles Grassley (R-IA), ranking member of the Senate Finance Committee, gave an excellent overview of the issue in a Senate floor speech Monday, going back to the origins of tax deferral and how the U.S. tax system treats overseas earnings. Excerpt:

Allow me to explain why the net effect of the bill would be to decrease U.S. employment.

First of all, if a U.S. parent company has a foreign subsidiary, then this creates managerial headquarters jobs in the U.S. that would not otherwise be there.  The Reid-Durbin-Dorgan bill might encourage American companies to simply sell off their foreign subsidiaries.  This would in turn mean laying off employees at management positions at the American headquarters.

A bigger way this bill would hurt employment in the U.S. would be to discourage assembly jobs in the U.S.   A U.S. parent company could have foreign subsidiaries engaged in manufacturing parts that are shipped back to the U.S. parent.  The U.S. parent in turn might assemble those parts here in the U.S. into a finished product.  So, yes, just maybe this bill would encourage the company to repatriate the parts production, but it’s just as easy to imagine that this bill would encourage the company to expatriate the assembly jobs.  So, this bill is an unacceptable gamble with American jobs.

In the words of the late Senator Moynihan in speaking in opposition to this proposal 14 years ago:  “Investment abroad that is not tax driven is good for the United States.”

More recently, Senator Baucus’ concerns that this would put the United States at a competitive disadvantage are exactly right.  Last Thursday, Senator Baucus was quoted in Congress Daily saying, “I’m looking at it.  I think it puts the United States at a competitive disadvantage. That’s why I’m concerned.”

• Wall Street Journal, “Antitax Group Hits Back on Outsourcing“
• Marketwatch, “Democrats try to lure jobs back to U.S.”

Here and there the American Association for Justice has tried to defend its claim for a $1.6 billion federal tax break by arguing that trial lawyers want to be treated just like any other business. One AAJ spokesperson made the claim in a recent interview with The Hill, but apparently refused to be identified. Talk about the courage of your convictions.

As issue is the attempt to deduct loans extended in support of contingency fee litigation as business expenses. Bills to accomplish that goal have died in Congress, so the trial lawyers quietly appealed to the U.S. Treasury for a special-interest tax intepretation.

But what about the point? Is it really just about fairness?

A Washington Times editorial this week refuted the claim. From “Pushback on trial-lawyer tax breaks“:

“The Treasury is looking to clarify a provision in the tax code that prohibits trial lawyers from deducting expenses for contingency cases in the year they are incurred,” according to The Hill. “Instead, these expenses can only be deducted after the case has concluded. The [lawyers] seek to make it so trial lawyers can deduct these expense in the year they are paid. … Currently, expenses incurred by trial lawyers for contingency cases are considered to be loans that the client will eventually repay.”

Victor Schwartz, author of a prominent textbook on tort law and a leading opponent of jackpot-justice lawsuits, has estimated for about 25 years without contradiction that plaintiffs’ lawyers win at least some money by judgment or settlement from some 95 percent of their cases. In other words, these are loans for which repayment is quite likely. As the Heritage Foundation’s Jack Park explains, “When a carmaker or dealer, [or] a furniture company … makes a loan to the buyer by selling over time, those loans are part of a related business, not a deductible business expense. In fact, those loans generally do not become deductible unless and until there is a default. Why shouldn’t the trial lawyers wait until there is a default to deduct their loans like everyone else?”

The difference is important because if the lawyers get the tax subsidy, the Treasury will be floating the lawyers’ interest costs.

The Times noted the July 22 letter to Treasury from the ranking Republicans on the tax-writing committees, Sen. Grassley of Senate Finance and Rep. Dave Camp of House Ways and Mean, that made a clear case that the tax break was not justified and would circumvent the policymaking branch of government, Congress.

Twenty-four Senate Republicans added their opposition in a letter Thursday to Treasury Secretary Geithner on Thursday, recognizing — we assume — how politically repellant this kind of lawsuit-subsidizing, special interest tax break would be to most Americans. From the letter organized by Sen. John Thune (R-SD): (continue reading…)

The ranking Republicans on the Senate and House’s tax-writing committees have written U.S. Treasury Secretary Geithner, urging him not to allow Treasury to circumvent Congress by letting trial lawyers deduct loans to clients in contingency litigation as business expenses.

Sen. Charles Grassley (R-IA) of the Senate Finance Committee and Rep. Dave Camp of the House Ways & Means Committee sent Geithner the letter late Thursday, the Chamber-backed Legal Newsline reported. The letter is available online here.

According to their joint news release, “Camp, Grassley Question Whether Executive Branch is Again Bypassing Congress to Impose Tax Policy“:

Grassley and Camp said they are concerned that Treasury might be establishing a pattern of unilaterally making tax changes in contravention of congressional intent. In November 2008, Treasury and the IRS came under fire from Grassley and others for giving a tax break that allowed banks to acquire one another. The Treasury ruling helped to accommodate the sale of the Wachovia Corporation to Wells Fargo. Grassley questioned whether Treasury had the authority to bestow such a tax break independently of congressional action.

Regarding the legal expenses issue, Camp and Grassley noted:

• No other Circuit Court has affirmed the Ninth Circuit decision;
• On other matters, the IRS has maintained its policies despite unfavorable decisions from multiple Circuit Courts; and
• Despite the introduction of provisions in both the House and Senate to affirm the Ninth Circuit Court decision, Congress has failed to enact such a law.

The two also demanded relevant documents from Treasury, including any that would explain why action was so urgent considering the issue wasn’t mentioned in the latest update of Treasury’s 2009-2010 Priority Guidance Plan.

The American Association for Justice, the trial lawyer lobby, has lobbied two successive Congresses for legislation to make the expenses deductible. Making the expenses deductible would be worth $1.57 billion over 10 years, the Joint Committee on Taxation estimated in May 2008. (Page 6, “Uniform treatment of attorney-advanced expenses and court costs in contingency fee cases.”)

It’s tough to sell a trial lawyer bailout in a time of soaring federal debt, and the sponsors of this year’s bills, Rep. Artur Davis of Alabama and Sen. Arlen Specter of Pennsylvania, lost clout after they were defeated in Democratic primaries. So the trial lawyers’ lobbying strategy became more recondite. The AAJ had been lobbying Treasury and the IRS along with Congress, according to page 12 of its first quarter 2010 lobbying disclosure form, but the association dropped its executive branch contacts in the second quarter. (Page 15 of the latest disclosure form.)

Instead, the AAJ hired the specialists at the Washington Tax Group to lobby the issue to the tune of $60,000 so far in 2010. (Lobbying disclosure forms show $20,000 in the first quarter and $40,000 in the second quarter report.) Patton Boggs also started lobbying Treasury for the AAJ in the second quarter for the deduction (but not in the first quarter). Well, there’s nothing wrong with turning to the experts.

What’s wrong is the policy itself that the AAJ is trying to achieve via Treasury. (continue reading…)

From The Sioux City Journal, “Obama headed to southeast Iowa, won’t stop in NW Iowa“:

CEDAR RAPIDS — When he comes to southeast Iowa next week, President Obama should talk about South Korea, Colombia and Panama, Sen. Chuck Grassley said Wednesday.

The president needs to address small business job creation and that means opening markets in those countries so U.S. manufacturers, producers and workers can compete on a level playing field, the Iowa Republican said.

Preliminary plans call for Obama’s White House to Main Street Tour to make stops in Fort Madison, Mount Pleasant, Ottumwa and April 27 between stops in Illinois and Missouri.

Senator Grassley (R-IA) used a darn good example to make his argument:

He cited Peoria, Illinois-based Caterpillar as an example of Midwest-based manufacturer that is at a disadvantage because of the lack of free-trade agreements. Equipment Caterpillar builds in Europe can be shipped to Colombia, for example, duty-free because of trade agreements, Grassley said.

“If they are made in Peoria, they pay a 35 percent tariff,” he said. “So level the playing field for the American worker by getting these agreements passed.”

And since we’re mentioning Sioux City, thanks to the Siouxland Chamber of Commerce for inviting NAM President John Engler to speak to the group during their Washington Conference this week. All the reports we’ve heard is that the visit went very well.

From WQAD, television in the Quad Cities, “Grassley touts manufacturing role during downturn“:

MUSCATINE, Iowa – Bridgestone Bandag’s training center symbolizes the American economy these days. As the huge retread tires spin inside high-tech machines, they represent the spiraling job cuts across Muscatine County as national unemployment continues to circle the country.

While Sen. Charles Grassley voted against the recent stimulus package, he does find that tax breaks from the legislation could help to spark the workforce.

“That will be very helpful to the worker for consumerism to promote the economy from this end,” he said.

Sen. Grassley was honored by the National Association of Manufacturers on Thursday at Bridgestone Bandag Tire Solutions. The longtime legislator was recognized for supporting manufacturing’s role in the economy.

“Government can create an environment for entrepreneurship, and manufacturing is a great part of that,” he said. “We need to have strong manufacturing.”

Bridgestone Bandag’s website is here.