How the Trump Republican Tax Cuts Are Helping Massachusetts

Massachusetts is benefiting greatly from the Tax Cuts and Jobs Act enacted by congressional Republicans and President Trump:
397,860 Massachusetts households are benefiting from the TCJA’s doubling of the child tax credit.
Every income group in every Massachusetts congressional district received a tax cut. Nationwide, a typical family of four received a $2,000 annual tax cut and a single parent with one child received a $1,300 annual tax cut.
2,150,760 Massachusetts households are benefiting from the TCJA’s doubling of the standard deduction. Thanks to the tax cuts, nine out of ten households take the standard deduction which provides tax relief and simplifies the tax filing process.
89,050 Massachusetts households are benefiting from the TCJA’s elimination of the Obamacare individual mandate tax. Most households hit with this tax made less than $50,000 per year.
Lower utility bills: As a direct result of the TCJA’s corporate tax rate cut, Massachusetts residents are saving money on utility bills. Lower electric, water, and gas bills help households and small businesses operating on tight margins. For example, Unitil, National Grid, and Eversource Energy (see below) all passed along tax reform savings to their customers.
Thanks to the tax cuts, Massachusetts businesses of all sizes are hiring, expanding, raising pay and increasing employee benefits:
Pan Am Systems, Inc. (North Billerica, Massachusetts) -- $1,100 tax reform bonuses for 719 employees.
Pan Am Systems, Inc. is a diversified holding company. Its subsidiaries include Pan Am Railways – the nation’s largest regional rail carrier by mileage operating in five states; Perma Treat Corporation – a wood products manufacturer, including railroad ties, and Pan Am Brands, a trademark licensing company.
In an effort to highlight the benefits of the landmark Tax Cuts and Jobs Act (“TCJA”), Pan Am Systems, Inc. is pleased to announce that it will be issuing a one-time bonus of $1,100.00 to each employee of the company and its subsidiaries, effective today. This bonus is intended to; (a) acknowledge the importance of our employees; and (b) provide those employees with additional compensation to use as they elect.
As noted by the President, the TCJA is intended to make resources available for investment by businesses that will have downstream effects of expanding and creating wealth among all citizens. Pan Am shares this goal and is committed to future capital investment to foster growth of the company. Pan Am strongly believes that programs such as the TCJA and the 45G tax credit, supported by continued reduction in overly burdensome regulations, provide substantial incentives for investment in America’s growth. – May 23, 2018 Pan Am Systems, Inc. press release
Pentucket Bank (Haverhill, Massachusetts) – $500 bonuses, increased base wages, increased additional educational opportunities through a University of Pentucket Bank program.
Suffolk Construction (Boston, Massachusetts) - Investing in new technology and data analytics:
Boston’s Suffolk Construction Co. will take much of the savings from the tax cuts and invest it in the company’s technology and data analytics, a growing area of focus for the $3.5 billion business, CEO John Fish said. The firm is one of the largest privately owned companies in Massachusetts. As of last year, it had nearly 1,000 employees in the state. On the topic of one-time bonuses for employees, Fish told the Business Journal that “to give a $1,000 bonus, that’s a traditional response to a nontraditional opportunity. We have an opportunity now to invest in our future.” - January 22, 2018, Boston Business Journal article excerpt
1A Auto, Inc. (Westford, Massachusetts) -- Bonuses for all full-time employees:
Massachusetts based online auto parts retailer 1A Auto announced across the board cash bonuses for all full-time employees. CEO Rick Green says that the decision was based on recent changes to tax policy. In a company meeting Wednesday, Green told employees, "Ultimately the tax savings will be passed to our customers in the form of lower prices, but we want to also share some of the savings with you, our hard-working employees." -- Jan. 25, 2018 1A Auto, Inc. press release
Thermo Fisher Scientific (Waltham, Massachusetts) -- $500 bonuses for 68,000 non-executive employees; increased charitable donations:
Thermo Fisher Scientific Inc. (NYSE: TMO), the world leader in serving science, will make additional investments totaling $50 million as a result of the benefit of recently enacted Federal tax reform legislation in the U.S. This investment includes:
$34 million for a one-time bonus of $500 to be paid to each of the company's approximately 68,000 eligible non-executive employees globally.
$16 million to accelerate key breakthrough R&D programs and also to increase the impact of the company's sustainability initiatives and philanthropic activities in support of STEM (Science, Technology, Engineering and Math) education.
"Thermo Fisher will benefit from tax reform, so we chose to use this unique opportunity to recognize the commitment of our colleagues who work hard every day to fulfill our Mission – to enable our customers to make the world healthier, cleaner and safer," said Marc N. Casper, president and chief executive officer, Thermo Fisher Scientific. "We also plan to use the benefit to fuel important programs that will strengthen our ability to serve our customers and the communities where we live and work." -- Jan. 31, 2018 Thermo Fisher Scientific press release
Unitil (Fitchburg, Massachusetts) - The utility will pass along tax cut savings to customers:
Unitil, which serves about 45,000 electric and gas customers in Massachusetts, said it expects to rebate customers about $1.6 million in tax savings. The company, which owns Fitchburg Gas and Electric Light Company, is one of the few utilities that isn’t seeking a rate increase this year. - June 30, 2018, The Daily News article excerpt
Cooperstown Environmental (Andover, Massachusetts) - Doubled the company-paid retirement contribution for all employees.
Pilgrim Bank (Cohasset, Massachusetts) - Base wage raised to $15 per hour; additional 401(k) contribution; increased charitable donations.
State Street (Boston, Massachusetts) – Enhanced employee retirement benefits and investment in training and community grant programs:
State Street will use this year's proceeds from the US tax overhaul measure to improve employees' retirement benefits and training and community grant programs, the company's chairman and chief executive said. – Jan. 23 Dow Jones Newswires report
Sinatra & Co. (Amherst, Massachusetts) -- The company is building apartments and new retail space in an Opportunity Zone created by the Tax Cuts and Jobs Act:
Nick Sinatra said he plans to retain much of the Boulevard Mall as he and his partners redevelop the 64-acre site they agreed to buy on Wednesday for $24 million.
The founder of Sinatra & Co. Real Estate said the mall will continue to operate as normal as they focus initially on construction of apartments and new retail and restaurant space on land along the street, beginning with the corner of Niagara Falls Boulevard and Maple Road.
Sinatra said he's been talking to Town of Amherst officials for a year or so about reusing the region's oldest enclosed shopping center. The site's inclusion in a federal Opportunity Zone program that promises tax credits to investors solidified his interest.
“We're going to turn the mall inside out," he said Thursday. “You want to create a walkable village for people."
Here are highlights of Sinatra's interview with The Buffalo News less than 24 hours after he won the bidding for the Boulevard Mall property, and reaction from industry observers:
Ownership group: Sinatra said his partners on this project include investors he has worked with for years on developments throughout this region and outside Western New York, including the Pritzker family in Chicago. They will buy the property through an Opportunity Zone fund that pulls together contributions from investors seeking the tax benefits of the federal program, he said. -- April 5, 2019 Buffalo News article
The TJX Companies Inc. -- Holding company for TJ Maxx, Marshalls, HomeGoods, Sierra Trading Post, Homesense -- (Headquarters in Framingham, Massachusetts, with many retail locations across the state) – the companies gave tax reform bonuses to employees, increased retirement fund contributions, paid parental leave and increased charitable contributions:
The 2017 Tax Act benefited the Company in the fourth quarter and full year Fiscal 2018. The Company expects to continue to benefit from the 2017 Tax Act going forward, primarily due to the lower U.S. corporate income tax rate. As a result of the estimated cash benefit related to the 2017 Tax Act, the Company is taking the following actions:
Associates:
-A one-time, discretionary bonus to eligible, non-bonus-plan Associates, globally
-An incremental contribution to the Company’s defined contribution retirement plans for eligible Associates in the U.S. and internationally
-Instituting paid parental leave for eligible Associates in the U.S.
-Enhancing vacation benefits for certain U.S. Associates
Communities:
Made meaningful contributions to TJX’s charitable foundations around the world to further support TJX’s charitable giving. – Feb. 28, 2018 The TJX Companies Inc. press release excerpt
The Stowaway (Mattapoisett); Speedwell Tavern (Plymouth); Gateway Tavern (Wareham); Sail Loft (Dartmouth) and Duck Inn Pub (Hyannis) -- $500 bonuses for full-time employees; $200 bonuses for part-time employees. Altogether at these affiliated restaurants, bonuses went to 93 employees:
All of the partners expressed the same reasoning for the bonuses, according to the release. They were happy to be able to share the tax savings by investing in their workforce. They recognize their people as their most important asset. They viewed the payouts as a way of giving back to their staffs, thanking them for everything they contribute to their organization’s success. The thought process was that the bonus checks will also benefit the local communities through employees spending more, boosting the area economically, according to the release. – Feb. 16, 2018 Wicked Marion Local article excerpt
STERIS Corporation (Northborough, Massachusetts) -- $1,000 bonuses:
Like many companies, the recent tax reform in the U.S. will result in significant additional earnings for STERIS to strategically grow our business and return value to Customers, employees and shareholders. One of our first actions on that front will be a one-time special discretionary bonus of $1,000 to all U.S. employees other than senior executives. -- Feb. 7, 2018 STERIS press release
National Grid (Waltham, Massachusetts) – The utility will pass along tax savings to customers:
On the heels of expansive federal tax reform, National Grid will request a reduction in its pending natural gas distribution rate proposal with the Massachusetts Department of Public Utilities.
When federal tax reform legislation was signed into law in late December, the company began assessing how reductions in corporate tax rates could benefit customers. The company announced today it will update its rate proposal with the DPU for natural gas rates that will go into effect in October 2018: reducing the original $87 million request to an estimated $51 million.
“We are committed to ensuring that the tax savings of the legislation are fully realized and are used to help our customers in their energy bills,” said Cordi O’Hara, president and COO of National Grid in Massachusetts. “We’ll continue to seek opportunities to provide this benefit to all of our customers.” – Jan. 11, 2018 National Grid press release
Eversource Energy (Boston, Massachusetts) – The utility will pass along tax savings to customers:
The newly passed federal tax law reduces the amount of taxes Eversource will be paying by millions of dollars and today the energy company has informed the Department of Public Utilities of its decision to voluntarily pass those savings along to customers.
“We believe it’s important that our customers reap the benefit of a lower tax rate,” said Eversource Massachusetts Electric Operations President Craig Hallstrom. “As a regulated power company our rates are based on our costs, including federal taxes, so if taxes are reduced ultimately costs are reduced and that benefits our customers.”
For example, customers in the company’s Eastern Massachusetts service territory will see a reduction in taxes of $47.6 million. This will cause a rate reduction of approximately $35.4 million, rather than the approved increase of $12.2 million (per the rate case decision Nov 30th). For Western Massachusetts, customers will benefit from a reduction in taxes of $8.3 million, reducing the approved increase of approximately $24.8 million to $16.5 million. -- Jan. 4, 2018 Eversource Energy press release
Blue Hills Bancorp Inc. (Norwood, Massachusetts) – $1,000 employee bonuses; total bonuses $70,000:
In addition, and as a result of the Tax Act, the Company recorded an expense of $70,000 in the fourth quarter of 2017 related to awarding a $1,000 bonus to each employee with a functional title below the Assistant Vice President level. The Company also took action to raise the hourly pay rate to $15 for a small number of hourly employees not already at that pay level. – Jan. 29, 2018 Blue Hill BanCorp Inc. press release
Dyer Capital Management, Inc. (Marion, Massachusetts) – Base wage raised 3.5% to $22 per hour; hourly employees also received a special one-time bonus:
In keeping with the economic prospects of the Tax Cuts & Jobs Act of 2017, Dyer Capital Management Inc. (DCM) has announced a special one-time bonus payable this month to each of its hourly employees. Also, the company is increasing the minimum hourly rate 3.5% to $22 an hour. President Timothy H. Dyer said: “In the spirit of shared success, we are pleased to reward our hourly workers with this good news now, as we anticipate brighter, future conditions for our economy and our country.” – Dyer Capital Management, Inc. press release
AT&T -- $1,000 bonuses for 874 Massachusetts-based employees; Nationwide, $1,000 bonuses for 200,000 employees, and a $1 billion increase in capital expenditures:
Today, Congress approved legislation representing the first comprehensive tax reform in a generation. The President is expected to sign the bill in the coming days.
Once tax reform is signed into law, AT&T* plans to invest an additional $1 billion in the United States in 2018 and pay a special $1,000 bonus to more than 200,000 AT&T U.S. employees — all union-represented, non-management and front-line managers. If the President signs the bill before Christmas, employees will receive the bonus over the holidays.
“Congress, working closely with the President, took a monumental step to bring taxes paid by U.S. businesses in line with the rest of the industrialized world,” said Randall Stephenson, AT&T chairman and CEO. “This tax reform will drive economic growth and create good-paying jobs. In fact, we will increase our U.S. investment and pay a special bonus to our U.S. employees.”
Since 2012, AT&T has invested more in the United States than any other public company. Every $1 billion in capital invested in the telecom industry creates about 7,000 jobs for American workers, research shows. -- Dec. 20, 2017 AT&T Inc. press release
Fidelity Bank (Leominster, Massachusetts) – Base wage raised to $14.25 and to $15 by 2020; increased community contributions through LifeDesign Community Dividend, hiring of new employees, investment in new technology tools and equipment, and new facility projects:
Fidelity Bank headquartered in Leominster with 10 full-service offices in central Massachusetts, is sharing the benefits it receives from the corporate rate going from 35 percent to 21 percent with its employees, clients, and community. In doing so, Fidelity Bank is leading the way for smaller, local community banks in Central Massachusetts to use tax savings in positive ways.
“We see tax reform as an opportunity to show our deep commitment to our three key constituencies –our valued employees, our community, and our clients” says Edward F. Manzi, Jr. Chairman and CEO of Fidelity Bank.
The local community bank will give all staff below the Vice President level a bonus of $500. Officials have decided to increase the minimum wage at Fidelity Bank to $14.25 per hour with a commitment to reach $15 per hour by 2020. Fidelity Bank is also allocating additional funds to its annual LifeDesign Community Dividend, investing the additional money in specific causes that support their community and the markets in which they operate. Examples include mental and physical health care; affordable housing; children’s education and support; and cultural organizations. Further, the bank’s 2018 plan includes investing in the hiring of new employees, new technology tools and equipment, and several facility projects including new LifeDesign Banking locations in downtown Worcester and Gardner – all to bring the value of the LifeDesign promise more effectively to more current and future clients.” – Feb. 14, 2018 Fidelity Bank press release excerpt
HarborOne Bank (Brockton, Massachusetts) – $500 bonuses to 600 bank employees; base wage raised to $15 per hour:
“The immediate outcome of this legislation will be tax savings for HarborOne, which has a direct impact on our bottom line,” CEO James Blake said. “It’s only fitting that this financial gain be shared with our employees.” – Dec. 28, 2017 Boston Herald article excerpt
Meridian Bancorp, Inc. (Boston, Massachusetts) – Base wage raised to $15 per hour; additional 20% will be added to existing bonuses; increased capital spending including building six new branch locations; additional charitable contributions:
Meridian Bancorp, Inc. (the "Company" or "Meridian") (NASDAQ:EBSB), the holding company for East Boston Savings Bank (the "Bank"), following the new tax law being passed by Congress and signed by the President on December 22, 2017, announced the following enhanced commitments to the Bank's employees, infrastructure investment and charitable giving which will benefit its customers and the communities it serves:
- The minimum wage for all employees will increase to $15 per hour
- An additional 20% will be added to the 2017 bonus as part of the Bank's Incentive Compensation Plan that will be paid to the Bank's 500+ employees in January 2018
- An increase to the Capital Spending Budget as a result of plans to build six new branch locations in 2018
- An increase in charitable giving by targeting $1 million in donations to community and non-profit organizations in 2018 – Jan. 3, 2018 Meridian Bancorp, Inc. press release excerpt
Apple (Apple store locations in Boston, Braintree, Burlington, Cambridge, Chestnut Hill, Dedham, Hingham, Holyoke, Lynnfield, Marlborough, Natick) - $2,500 employee bonuses in the form of restricted stock units; Nationwide, $30 billion in additional capital expenditures over five years; 20,000 new employees will be hired; increased support of coding education and science, technology, engineering, arts, and math; increased support for U.S. manufacturing.
Berkshire Hills Bancorp Inc. (Pittsfield, Massachusetts) – Base wage raised to $15 per hour; $1,000 bonuses to over 1,000 employees; investments in employee development and training; $2 million in additional charitable giving:
Berkshire Hills Bancorp, Inc. (NYSE: BHLB), the parent of Berkshire Bank, today announced additional investments in its employees and communities following the recent passage of federal tax reform legislation.
These investments include:
- Raising Berkshire's minimum wage to $15 per hour.
- Providing a special, one-time bonus of $1000 to over 1000 employees. This grant benefits all full-time employees below a certain compensation threshold, covering over 70% of the Bank's workforce, and augments the special $500 holiday bonus these colleagues received in the fourth quarter.
- Enhancing Berkshire's investment in employee development and training programs to benefit our employees and bolster our current offering at AMEBU – American's Most Exciting Bank University.
- Contributing $2 million to the Berkshire Bank Charitable Foundation which supports charitable organizations, scholarships, and volunteerism across Berkshire's local communities. This will bolster the foundation's endowment and allow for increased local giving. Last year we provided over $2 million to our local communities, complementing our employee volunteer program which helps our employees contribute over 40,000 hours of volunteer service each year. -- Jan. 4, 2018 Berkshire Hills Bancorp Inc. press release
Adams Community Bank (Adams, Massachusetts) -- $1,000 bonuses for full-time employees; $500 bonuses for part-time employees; base wage raised to $13.25 per hour; other wage increases; increased charitable contributions, increased capital expenditures, and more:
Adams Community Bank today announced investments in its employees, customers, and the Berkshire community following the recent passage of federal tax reform legislation.
These investments include:
- Paying a special one-time bonus of $1,000 to full time employees, and $500 to part time employees. This initiative is focused on those employees making below a certain compensation threshold.
- Increasing base pay by $1 per hour for regular non-officer employees making below a certain compensation threshold.
- Raising our minimum wage to $13.25.
- Reducing the employee’s share of medical and dental insurance premiums from 30% to 20%, for all bank employees who are not officers.
- Increasing interest rates on customer deposit products beginning in January.
In addition, during 2018 Adams Community Bank will be upgrading our website, ATM’s and streamlining account-opening processes.
Finally, the Bank anticipates having more money to use for our long-standing goal of donating 10% of net income each year to local charitable and non-profit initiatives.
“The recent change to the Federal tax law offered a unique opportunity to assess how we can use this savings to improve our community,” said Charles O’Brien, President and CEO. “The bank will benefit from the lowering of corporate tax rates and as a true community bank headquartered in the Berkshires we would like to pass along these savings right here at home by investing in our staff, our customers, and the local community. These initiatives will put more money into the pockets of our employees, our customers, and the local non-profit community which will serve to benefit the Berkshire economy. We are thrilled that more than 80% of our staff will be positively impacted by these changes. In addition we are planning to add to our staff during 2018 by hiring several employees to better serve our growing customer base.”
O’Brien also noted “these compensation changes are in addition to the full complement of benefits the bank offers including an existing incentive plan for all staff, our pension and 401(K) plans, life insurance, tuition reimbursement, employee wellness, and more. Some banks have eliminated or scaled back on some of these benefits but we strive to attract the most talented staff. Our entire salary and benefit package is the most competitive offered by any community bank within Berkshire County.” -- Jan. 25, 2018 Adams Community Bank press release
Waste Management, Inc. (Multiple locations in Massachusetts) – $2,000 bonuses:
Waste Management, Inc. (NYSE: WM) announced today that, in light of the meaningful contributions of its employees and the new U.S. corporate tax structure, the company will distribute US $2,000 in 2018 to every North American employee non on a bonus or sales incentive plan; that includes hourly and other employees.
"We are about to get a tax benefit as our U.S. corporate tax rate goes from 35 percent to 21 percent. In considering how to best spend that, we wanted to find a way to help grow our economy, which in turn, will help grow our business, and give some of the tax savings back to those hardworking employees who do not get the opportunity to participate in our salaried incentive plans," said Jim Fish, president and chief executive officer, Waste Management.
“So, we are offering each North American hourly full-time employee and salaried employee who does not participate in any sales incentive or bonus plan during 2018, a cash bonus of US $2,000 to show our appreciation to so many of our valued employees while growing our business and returning a good portion of the tax savings directly to the overall economy," he continued.
Approximately 34,000 qualified Waste Management employees could receive this special bonus. – Jan. 10, 2018 Waste Management, Inc. press release
Walmart – Massachusetts employees at 49 Walmart stores received tax reform bonuses, wage increases, and expanded maternity and parental leave. Walmart employees who adopt children will be given $5,000 to help cover expenses.
T.J. Maxx – 52 stores in Massachusetts – Tax reform bonuses, retirement plan contributions, parental leave, enhanced vacation benefits, and increased charitable donations.
Home Depot -- 45 locations in Massachusetts, bonuses for all hourly employees, up to $1,000.
Lowe's --3,000+ employees at 27 stores and one distribution facility in Massachusets. Employees will receive bonuses of up to $1,000 based on length of service, for 260,000 employees; expanded benefits and maternity/parental leave; $5,000 of adoption assistance.
CarMax (Four locations in Massachusetts) – $250-$1,500 bonuses depending on length of service:
The nation’s largest retailer of used cars, announced plans to provide one-time bonuses to most hourly and commissioned full-time and part-time associates as a result of the recently passed Tax Cuts and Jobs Act of 2017. Bonus amounts will vary from $200 up to $1,500 based on length of service with the company. – Feb. 23, 2018 EPR Retail News article excerpt
Rollstone Bank & Trust (Leominster, Massachusetts) -- Increased charitable contributions:
“As a bank invested in our communities, RBT takes great pride in supporting local organizations that make a positive impact on so many people. The United Way of North Central Massachusetts is one of those organizations,” said Martin F. Connors Jr., president and CEO of Rollstone Bank & Trust. “We are fortunate to have such great health care in our area, and are pleased we can help them continue their mission.”
Connors added that recently implemented reductions in the corporate tax rate will allow RBT to give back to an even greater extent than it has in the past.
“The tax cut provides us the opportunity to continue and even expand our investments in our region, customers, and employees,” he said. - May 17, 2018 Leominster Champion article excerpt
Ryder (15 locations in Massachusetts) – Tax reform bonuses for employees.
Cintas (Multiple locations in Massachusetts) -- $1,000 bonuses for employees of at least a year, $500 for employees of less than a year.
Chipotle Mexican Grill (Multiple locations in Massachusetts) – Bonuses ranging from $250 to $1,000; increased employee benefits; $50 million investment in existing restaurants.
Comcast (Multiple locations in Massachusetts) -- $1,000 bonuses; nationwide, at least $50 billion investment in infrastructure in next five years.
Starbucks Coffee Company (Multiple locations in Massachusetts) –$500 stock grants for all retail employees, $2,000 stock grants for store managers, and varying plan and support center employee stock grants. Nationally, 8,000 new retail jobs; an additional wage increase this year, totaling approximately $120 million in wage increases, increased sick time benefits and parental leave.
U-Haul (Multiple locations in Massachusetts) – $1,200 bonuses for full-time employees, $500 for part-time employees.
FedEx (Multiple locations in Massachusetts) – Accelerated and increased compensation; pension plan contributions:
“FedEx Corporation is announcing three major programs today following the recently enacted U.S. Tax Cuts and Jobs Act:
- Over $200 million in increased compensation, about two-thirds of which will go to hourly team members by advancing 2018 annual pay increases by six months to April 1st from the normal October date. The remainder will fund increases in performance- based incentive plans for salaried personnel.
- A voluntary contribution of $1.5 billion to the FedEx pension plan to ensure it remains one of the best funded retirement programs in the country.
- Investing $1.5 billion to significantly expand the FedEx Express Indianapolis hub over the next seven years. The Memphis SuperHub will also be modernized and enlarged in a major program the details of which will be announced later this spring.
FedEx believes the Tax Cuts and Jobs Act will likely increase GDP and investment in the United States. – Jan. 26, 2018 FedEx press release
McDonald’s (250+ locations in Massachusetts) – Increased tuition investments which will provide educational program access for 400,000 U.S. employees. $2,500 per year (up from $700) for crew working 15 hours a week, $3,000 (up from $1,050) for managers, and more:
McDonald’s Corporation today announced it will allocate $150 million over five years to its global Archways to Opportunity education program. This investment will provide almost 400,000 U.S. restaurant employees with accessibility to the program as the company will also lower eligibility requirements from nine months to 90 days of employment and drop weekly shift minimums from 20 hours to 15 hours. Additionally, McDonald’s will also extend some education benefits to restaurant employees’ family members. These enhancements underscore McDonald’s and its independent franchisees’ commitment to providing jobs that fit around the lives of restaurant employees so they may pursue their education and career ambitions.
The Archways to Opportunity program provides eligible U.S. employees an opportunity to earn a high school diploma, receive upfront college tuition assistance, access free education advising services and learn English as a second language.
“Our commitment to education reinforces our ongoing support of the people who play a crucial role in our journey to build a better McDonald’s,” said Steve Easterbrook, McDonald’s President and CEO. “By offering restaurant employees more opportunities to further their education and pursue their career aspirations, we are helping them find their full potential, whether that’s at McDonald’s or elsewhere.”
Accelerated by changes in the U.S. tax law, McDonald’s increased investment in the Archways to Opportunity Program includes:
- Increased Tuition Investment:
- Crew: Eligible crew will have access to $2,500/year, up from $700/year.
- Managers: Eligible Managers will have access to $3,000/year, up from $1,050.
- Participants have a choice for how they apply this funding – whether it be to a community college, four year university or trade school. There is no lifetime cap on tuition assistance – restaurant employees will be able to pursue their education and career passions at their own pace. The new tuition assistance is effective May 1, 2018 and retroactive to January 1, 2018.
- Lowered Eligibility Requirements: Increase access to the program by lowering eligibility requirements from nine months to 90 days of employment. In addition, dropping from 20 hours minimum to 15 hours minimum (roughly two full time shifts) per week to enable restaurant employees more time to focus on studies.
- Extended Services to Families: Extension of Career Online High School and College Advisory services to restaurant employees’ family members through existing educational partners Cengage and Council for Adult and Experiential Learning (CAEL).
- Additional Resources: Career exploration resources for eligible restaurant employees to be available later this year.
- Creation of an International Education Fund: Grants to provide local initiatives and incentives in global markets to further education advancement programs.
“Since its inception, Archways to Opportunity was meant to match the ambition and drive of restaurant crew with the means and network to help them find success on their own terms,” said David Fairhurst, McDonald’s Chief People Officer. “By tripling tuition assistance, adding education benefits for family members and lowering eligibility requirements to the equivalent of a summer job, we are sending a signal that if you come work at your local McDonald’s, we’ll invest in your future.”
After launching in the U.S. in 2015, Archways to Opportunity has increased access to education for over 24,000 people and awarded over $21 million in high school and college tuition assistance. Graduates have received college degrees in Business Administration, Human Resources, Communications, Accounting, Microbiology and more. – March 29, 2018 McDonald’s Corporation press release excerpt
Note: If you know of other Massachusetts examples, please email John Kartch at jkartch@atr.org
The running nationwide list of companies can be found at www.atr.org/list
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President Biden's order to kill the KeystoneXL pipeline is not only hitting pipeline workers. Small businesses along the pipeline route are also being hit hard.
South Dakota resident Tricia Burns owns a gym in Philip, South Dakota:
"We lost 45 memberships -- that's over $3,000 in monthly revenue that was gone literally within 48 hours. We had negotiated contracts with security companies that were coming in to secure the pipeline. That would have brought us another 120 memberships."
Indiana House Republicans Push Second Tax Hike in Four Years

The Indiana State Senate will have to stop the latest tax hike scheme to come out of the Indiana House of Representatives in the past four years.
Last week, the House approved a budget that increases taxes overall, on the back of a tax hike on vape and tobacco products.
Only two Republicans voted no, with a handful not voting. A dozen members who promised their constituents they would not vote to increase taxes, voted to do just that for a second time. Their constituents are likely thinking of the old saying, ‘Fool me once, shame on you. Fool me twice, shame on me’.
In 2017, the Indiana legislature approved a significant increase in the state gas tax. This year it is a dangerous tax on vaping, and misguided tax hike on cigarettes.
Increasing taxes on vape products simply means fewer people will switch to vaping from higher risk tobacco products, and small businesses like vape shops will suffer as they try to recover from a pandemic and keep people employed.
Budget lead Rep. Tim Brown said, “one of the most important things we can do in the state of Indiana to make us a healthier state is to decrease smoking.” In fact, his tax hikes will do the exact opposite.
Reduced-risk tobacco alternatives such as e-cigarettes that are proven 95% safer than combustible tobacco and twice as effective as more traditional nicotine replacement therapies. It is downright irresponsible to hurt people who are trying to quit smoking.
Cigarettes may look like a soft political target, but increasing taxes on them carries multiple downsides – and there is no upside for health.
Data from the National Adult Tobacco Surveys has consistently demonstrated that tobacco tax increases have no statistically significant impact on the prevalence of smoking among those with household incomes of less than $25,000. Seventy-two percent of smokers are from low-income communities.
They also lead to smuggling. According to the nonpartisan Tax Foundation, tobacco taxes in nearby Michigan and Illinois have resulted in 20% of the market consisting of illicit tobacco.
New revenues would be slated to go to Medicaid, but cigarette taxes are notorious for falling short of revenue promises. Missed revenue means gaps that government is loathe to address by cutting spending – meaning they’ll find other taxes to increase to keep spending levels up.
To be fair, a positive from this budget is the expansion of school choice, which empowers parents at a time when the importance of that choice is more clear than ever.
By pursuing these tax increases, Indiana House Republicans are making promises they can’t keep, while breaking the understanding voters have that Republicans will protect their wallets.
Indiana Senators can and should stop their House colleagues from harming themselves, and the taxpayers they represent. The more legislators get used to increasing taxes, the more Indiana will slip from the pro-taxpayer, business-friendly state it has been.
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ATR Supports the “Protecting Retirement Savers and Everyday Investors Act”

ATR President Grover Norquist today released a letter in support of the “Protecting Retirement Savers and Everyday Investors Act,” legislation that prohibits states from imposing financial transactions taxes (FTT) on American savers and investors across the country.
All members of Congress should support and co-sponsor this legislation.
You can read the full letter here or below:
March 3rd, 2021
Re: Support the “Protecting Retirement Savers and Everyday Investors Act"
Dear Representatives McHenry and Huizenga:
I write in support of the “Protecting Retirement Savers and Everyday Investors Act,” legislation that prohibits states from imposing financial transactions taxes (FTT) on American savers and investors across the country. All members of Congress should support and co-sponsor this legislation.
Most FTT proposals impose a 0.1 – 0.25 percent tax on any buying and selling of stocks, bonds, and other financial instruments.
In the wake of the Robinhood-GameStop controversy, several Democrats have called for FTTs to limit market volatility. FTTs would do nothing to limit volatility: rather, they would act as a Trojan Horse to pass new regulations and new taxes.
If implemented in any given state, an FTT would result in significant harm to investors. Because the tax would be imposed on transactions processed by the exchanges in a state, it would harm investors across the country, not just those in the state which implements it. Your legislation would protect against this by prohibiting a financial transactions tax on taxpayers outside a state’s borders.
FTTs represent another attempt by the left to create new and higher taxes on the American people and grow the size and scope of government. If implemented, this tax would have broad, negative economic effects. It would impose an additional layer of taxation on top of corporate income taxes, capital gains taxes, and individual income taxes. This would impose a barrier to trades, which could increase the cost of capital and reduce economic productivity.
This tax could even increase market volatility as investors would be less likely to buy and sell. It also punishes shareholders who have strategically invested, saved and planned for a prosperous future.
An FTT would especially impact 401(k)s, pensions, and index funds. These funds make frequent trades, so the tax would increase the costs of buying and selling, resulting in lower returns. A 0.1% surcharge would require average Americans to work another 2.5 years before retiring in order to make up for the shortfall in savings. A 2021 study conducted by the Modern Markets Initiative found a proposed financial transaction tax would cost $45,000 to $65,000 over the lifetime of a 401(k) account.
FTTs fail to raise significant revenue because they reduce trades and increase the cost of capital. In fact, an analysis by the Congressional Budget Office found that imposing a FTT would “decrease the volume of transactions and would make some types of trading activity” and “probably reduce output and employment.”
This is not hypothetical. FTTs have failed when they have been tried overseas. For instance, in 1984, Sweden imposed a financial transaction tax. However, this tax lasted just six years due to investors fleeing to foreign markets. Not only did the FTT raise little revenue, capital gains tax revenue dropped because of a reduction in sales. According to the Center for Capital Markets, this has also happened in Spain (1988), Netherlands (1990), Germany (1991), Norway (1993), Portugal (1996), Italy (1998), Denmark (1999), Japan (1999), Austria (2000), and France (2008). It was even repealed here in the United States in 1965 through a bipartisan vote, due to its failure. In the years following the repeal, trading volume in the United States increased substantially.
While many are motivated to support an FTT by their disdain for short-selling, the fact is that short selling is not responsible for market crashes and economic downturns. Instead, it is a function of the free market. Investors will short a stock when they think it is overvalued. In this way, it helps promote investor efficiency and provides information to markets, ultimately softening the blow of a downturn.
For instance, the 2008 market crash could have been far more widespread if short sellers hadn’t recognized the housing market was overvalued. Arbitrarily restricting this trading will likely lead to severe pain if we experience another crash. Rather than improving market volatility, an FTT could make this problem worse as there would be fewer buyers and sellers and therefore more price jumps.
The effort by blue states to impose FTTs should be rejected. These taxes have failed where they have been tried before, would harm economic growth and investment, and would fail to raise any significant revenue.
The Protecting Retirement Savers and Everyday Investors Act would protect Americans from FTTs by ensuring that states could not impose them on taxpayers across state lines. All members of Congress should co-sponsor and support this important, pro-taxpayer legislation.
Onward,
Grover Norquist
President, Americans for Tax Reform
Photo Credit: S Chia
It’s Not Just Blue States Where Surprise Tax Bills Are A Threat This Spring

As in many state capitals, lawmakers in North Carolina are currently debating whether or not to fully conform with all of the tax relieving and liquidity enhancing provisions in the Coronavirus Aid, Relief, and Economic Security (CARES) Act relief package approved by Congress last April.
North Carolina legislators have already conformed to the CARES Act’s tax exemption for forgiven PPP loans, approving that state level tax exemption last Spring. This conformity, which most other states have followed suit in enacting, or are in the process of passing, ensures that businesses who have been able to remain open with the help of a PPP lifeline will not be hit with a surprise state income tax bill. Right now, 29 states, including neighboring South Carolina, will not tax forgiven PPP loans.
While North Carolina lawmakers have exempted forgiven PPP loans from state taxation, they have not permitted the same payroll deduction authorized federally, nor have they permitted the code to conform with the other liquidity enhancing provisions of the CARES Act. Americans for Tax Reform recently sent a letter to legislators in North Carolina urging them to pass legislation doing just that.
Legislation to accomplish this goal, Senate Bill 104, was introduced on February 27 by Senators Jim Perry, Chuck Edwards and David Craven. It’s ATR’s position that North Carolina legislators should not tax employers’ pandemic relief aid, nor do they even need to, as the state has a reported $4 billion budget surplus.
In addition to the PPP loans, the CARES Act increased business liquidity in a time of crisis by reducing existing limitations on business interest expenses subject to deduction in tax years 2019 and 2020; eliminating loss limitations for noncorporate taxpayers that were enacted as part of the 2017 Tax Cuts & Jobs Act (TCJA) for tax years 2018, 2019, and 2020; and relaxing the TCJA’s limitation of NOL deductions, permitting a five-year carryback of NOLs generated in tax years 2018, 2019, and 2020.
The last thing struggling small businesses need right now is a surprise tax bill brought on by acceptance of pandemic aid. Enactment of SB 104 will prevent that from happening in North Carolina. By passing SB 104, which would have North Carolina’s tax code conform to the other liquidity-increasing provisions of the CARES Act, North Carolina lawmakers will boost the job-creating and sustaining capacity of employers at a critical time for many businesses.
Photo Credit: Mr.TinDC
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"Canceling this Keystone Pipeline to make a group of people happy has had real life consequences. We got people who can't work now, can't provide for their families."

Americans for Tax Reform is collecting personal testimonials of Americans hit by President Biden's policies. (If you would like to submit a short video, please send it to Mike Mirsky at mmirsky@atr.org).
Please watch this video from Neal Crabtree:
"My name is Neal Crabtree. I was welding on the Keystone XL pipeline January the 20th and I was laid off that very same day, the same day that president Biden took office.
One of the biggest issues I have is how people don't seem to care. They say these are just temporary jobs. Well, if you think about it, a lot of jobs in this country are temporary. When a carpenter goes to build a house, he's not working on that same house his entire career. He starts that house and finishes it and moves on to another one.
The same way with a lawyer. When he signs up a client he takes that case to court, and he either wins or loses, and then he moves on to another one. In this case, that pipeline was our client and the government is taking our future away by not letting us work.
To me, leadership -- which, when I say leadership I'm referring to the president, leadership isn't thinking you're solving one problem when you're really creating another one.
Canceling this Keystone Pipeline to make a group of people happy has had real life consequences. We got people who can't work now, can't provide for their families."
ATR Leads Coalition Supporting Legislation to eliminate the Office of Financial Research

Today a group of free market groups released a letter supporting Sen. Ted Cruz (R-Texas) and Rep. Ted Budd's (R-N.C.) legislation to eliminate the Office of Financial Research.
Established under the Dodd-Frank Wall-Street Reform and Consumer Protection Act, the Office of Financial Research is a regulatory agency that collects data provided by financial institutions, such as bank holding companies. The data is used to examine financial market risks and supports the Financial Stability Oversight Council. This data is commonly volunteered by financial institutions. However, Dodd-Frank provides wide latitude for the Office’s Director to use their subpoena power to demand the data.
OFR receives funding outside the congressional appropriations process through fees the agency collects from the financial institutions that it regulates. As a result, the agency avoids direct congressional oversight, allowing OFR to determine what their budget should be almost unilaterally. For the fiscal year 2020, the OFR had a $62.7 million budget and about 100 full-time staffers.
The Office of Financial Research is redundant and duplicative. Its mission to research the stability of financial institutions has been conducted by roughly 20 other federal agencies, well before the enactment of Dodd-Frank, including the Department of Treasury’s Office of Economic Policy, the Federal Deposit Insurance Corporation’s Center for Financial Research, and the Federal Reserve’s Division of Financial stability
The previous Republican Administration took steps to shrink the Office and reduce its regulatory burden on the financial services industry. However, the current Director of the OFR, President Trump appointee Dino Falaschetti, has reversed his stance on agency cuts and called for more funding and increased staffing. Additionally, the newly appointed Secretary of Treasury Janet Yellen acknowledged in her written testimony before the Senate Finance Committee that she would reassess the Office’s cuts and expanding the agency’s footprint to research the economic effects of climate change.
Furthermore, a new Director under a Biden Administration could potentially weaponize the Office’s subpoena power to collect information from financial institutions lending activity to publicly shame institutions from servicing certain industries.
The organizations who joined this coalition letter are proud to support Senator Cruz’s efforts to curb further government overreach by unaccountable agency bureaucrats.
Click here or see below to view the letter.
Dear Senator Cruz & Congressman Budd:
On behalf of the undersigned organizations, we write to express our support for your legislation eliminating the unaccountable Office of Financial Research. This agency was established in 2010 by the Dodd-Frank Act and operates outside the Congressional appropriations process, receiving its funding from industry fees collected from financial institutions.
In response to the financial crisis of 2008, Congress quickly passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, expanding the federal government’s role in oversight of the financial marketplace and created several new regulators. The Office of Financial Research serves as a data collection agency that supports the Financial Stability Oversight Council, another regulator initiated by Dodd-Frank. While much of the data collected by OFR is voluntarily provided by private financial institutions, Congress granted the Office’s Director subpoena power to collect information from bank holding companies as he sees fit.
OFR receives its funding through fees collected predominantly from the bank holding companies it regulates, insulating itself from Congressional oversight. Congress has no authority to review OFR's operations and how it spends its fees, shielding the Office from Congressional accountability. For bank holding companies, there are limited options other than surrendering capital to fund their regulator.
The Office of Financial Research's mission to support the Financial Stability Oversight Council with financial research is duplicative in nature. Nearly 20 other agencies, departments, bureaus, and committees exist and already conducts similar research, including the Department of Treasury’s Office of Economic Policy, the Federal Deposit Insurance Corporation’s Center for Financial Research, and the Federal Reserve’s Division of Financial Stability. OFR is housed within the Treasury and operated on an annual budget of $62.7 million for the 2020 fiscal year. Furthermore, despite OFR's significant outlays, the bureau has a history of producing incomplete and analytically unsound research.
Concerningly, the current Director of the OFR, President Trump appointee Dino Falaschetti, is now calling for more funding and increased staffing to increase the agency's scope. The Trump administration took steps to shrink the Office and limit its intrusion among financial institutions. But, Secretary of the Treasury Janet Yellen discussed reassessing the Office's cuts and expanding the Office's scope to include climate research during her confirmation hearing before the Senate Financial Committee.
Under the Biden Administration, a Democrat-appointed Director could weaponize the Office and abuse its subpoena power to liberally collect information from financial institutions. Specifically, the Office could be used as a backdoor collection point for banks to surrender information regarding their lending activity in an attempt to publicly shame institutions and discourage them from lending to certain industries. For these reasons, we, the undersigned organizations, strongly support your legislation to eliminate the Office of Financial Research in its entirety.
Sincerely,
Grover Norquist
President, Americans for Tax Reform
Adam Brandon
President, FreedomWorks
Andrew F. Quinlan
President, Center for Freedom and Prosperity
Heather R. Higgins
CEO, Independent Women’s Voice
Pete Sepp
President, National Taxpayers Union
Maureen Blum
Executive Director, USA Workforce
Phil Kerpen
President, American Commitment
Matthew Kandrach
President, Consumer Action for a Strong Economy
Iain Murray
Vice President, Competitive Enterprise Institute
Tom Schatz
President, Council for Citizens Against Government Waste
Photo Credit: RoguePlanet
Nebraska's LB459 Would Increase Taxes on Life-Saving Products, Lead To Increase In Tobacco-Related Deaths

Americans for Tax Reform submitted testimony today in opposition to Nebraska’s Legislative Bill 459, which would increase taxes on life-saving reduced risk tobacco alternatives such as e-cigarettes and increase the highly regressive tax on tobacco.
ATR Director of Consumer Issues, Tim Andrews, wrote: "These anti-science provisions would have a disastrous impact upon not only businesses, but public health throughout the State, and lead to an increase in tobacco-related deaths. LB 459 also seeks to increase the highly regressive tax on tobacco, disproportionately harming the state’s most vulnerable populations at a time when they can least afford it, while doing nothing to reduce smoking rates."
Andrews noted the ever-growing body of research showing vapor products are an effective harm reduction tool for adults looking to quit smoking: "Extrapolating from a large-scale analysis by the US's leading cancer researchers and coordinated by Georgetown University Medical Centre, if a majority of smokers in the state of Nebraska made the switch to vaping, over 40,000 lives would be saved. In seeking to tax these life-saving products, this bill would place these in jeopardy.”
LB 459 fails to incentivize smokers to move away from deadly combustible cigarettes. Andrews noted that "As the price of a product increases, its use decreases. In previous instances, levying taxes on vaping products has been proven to increase smoking rates as people shift back to deadly combustible cigarettes. Minnesota is serving as a case study on this already. After the state imposed a tax on vaping products, it was determined that it prevented 32,400 additional adult smokers from quitting smoking. Small increases in projected revenue should never come at the expense of human lives.”
The full testimony can be found here.
Photo Credit: Jimmy Emerson
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Lawmakers Should Reject H.R. 1, the "For the People Act"

As soon as this week, the House of Representatives is set to vote on H.R. 1, the "For the People Act." In the coming weeks and months, the law is also expected to be taken up by the Senate. H.R. 1, a top priority for Congressional Democrats, is an 800-page bill filled with partisan policies to rig the system in favor of the Left.
This proposal would fundamentally transform how elections are conducted in the United States, would politicize the Federal Elections Commission, would create taxpayer-funded candidates, and would directly violate constitutional mandates like free speech and states’ freedom to determine their own election laws. Congress must reject this dangerous piece of legislation.
Instead of working within our institutions, Democrats have taken to attacking the institutions themselves when they do not produce the left's preferred outcome. When they didn't like the composition of the Supreme Court, they threatened to pack it. When they couldn't convince enough of the legislature of an idea, they fought to repeal the filibuster. Now, because they do not want to lose the presidency or their majorities in the House and Senate, they are working to pass H.R. 1.
See Also: Key Vote: ATR Urges NO Vote on H.R. 1, the "For the People Act"
H.R. 1 would unconstitutionally undermine state election oversight. Article I Section IV of the U.S. Constitution empowers states to determine the “Times, Places and Manner of holding elections…” By nullifying several state election laws, H.R. 1 would make significant strides in stripping states of this enumerated power.
It would force states to implement early voting, automatic voter registration, same-day registration, online voter registration, and no-fault absentee balloting.It eliminates any restrictions on vote-by-mail. Additionally, the bill would invalidate voter identification laws all across the country by allowing voters to simply sign a statement affirming their identity as they enter their polling place.
H.R. 1 would create taxpayer-funded candidates. Taxpayers would be on the hook for matching 600% of campaign contributions to subsidize candidates they may disagree with – a practice that has been ripe for corruption, despite having the intentions of reducing corruption.
Thomas Jefferson once said: “To compel a man to furnish funds for the propagation of ideas he disbelieves and abhors is sinful and tyrannical.” In this way, it could be described as compelled speech. Especially because it will almost certainly propagate one political party (the Democratic party) over the other upon implementation.
Taxpayers should not be forced to fund campaigns they find disagreeable. In fact, they shouldn’t be forced to fund campaigns they agree with. Americans’ ability to choose to or refuse to participate in politics has always been a foundational principle in the United States.
H.R. 1 suppresses free speech. First, it empowers federal regulators to categorize and regulate speech, including online speech. It does so by undoing the FEC’s “internet exemption” which excludes the internet from regulation of political speech. This exposes online communication to the same scrutiny as traditional advertisements.
The law also invents a new regulation called “PASO,” an overbroad standard that asks whether political speech “promotes,” “attacks,” “supports,” or “opposes” a federal candidate or official. Besides the blatant unconstitutionality of this regulation, it is also so unclear and broad that it can be used as a weapon by whichever political party is in power. As Rich Lowry explains, the current law “limits expenditures that expressly advocate for the election or defeat of a candidate, or refer to a candidate in public advertising shortly before an election.”
Any and all political, nonelectoral messages can be framed as something which promotes, attacks, supports, or opposes a candidate. Under this law, the party in power can frame their opponents’ political speech this way and subsequently limit their opponents’ speech.
Additionally, the bill transforms the “stand by your ad” disclaimer in video advertisements, forcing organizations to identify their top five donors at the end of advertisements. This represents a radical change in policy: currently, the “stand by your ad” provision simply requires a statement by the candidate or organization/corporation that they approve the communication. In addition, the bill mandates the disclosure of all the names and addresses of donors giving more than $10,000 to groups that engage in “campaign-related disbursements.” With the incredible rise in partisanship, cancel culture, and doxing, it is more important than ever to protect donor privacy.
Finally, H.R. 1 would politicize the FEC. Under current law, the FEC is comprised of a six-member bipartisan committee: three Republicans and three Democrats. In order to move forward with any prosecution of alleged campaign violations or investigations, the FEC needs four votes. This law would limit the member number to five, therefore including two Republicans, two Democrats, and one “independent” from a minor political party. Under this rule, a president could appoint a Bernie Sanders-style “independent” to serve as the fifth member of the FEC. To make matters worse, under this law, a president could also pick the Chairman of the FEC, all but ensuring total presidential control of the Commission.
H.R. 1 is a dangerous piece of legislation. This legislation would suppress free speech, invalidate state laws, create taxpayer-funded candidates, and do nothing to help the economy or fight the Coronavirus pandemic. This Democrat power grab should be rejected.
Photo Credit: Martin Deutsch
Pipeline Welder: "Biden's decisions to shut down the KeystoneXL pipeline and many others affects me and my family of five very much so."

Americans for Tax Reform is collecting personal testimonials of Americans hit by President Biden's policies. (If you would like to submit a short video, please send it to Mike Mirsky at mmirsky@atr.org).
Please watch this video from Nate Manor, a member of Pipeliners Local Union 798:
"Hi my name is Nate Manor. I am a proud 798 pipeline welder. President Biden's decisions to shut down the KeystoneXL pipeline and many others affects me and my family of five very much so. Having 16 years of pipeline experience -- and that being all I've really done or known most of my life and made a really good living and had great health insurance and everything else for my kids and family -- the starting over thing is going to be really hard, almost next to impossible for me."
ATR Signs Coalition Letter Urging Congress to Overhaul Fannie Mae and Freddie Mac

Americans for Tax Reform joined a group of free-market groups and signed a coalition letter encouraging legislators to prioritize reforming Fannie Mae and Freddie Mac this Congress. Reforming these Government Sponsored Enterprises and their conservatorship will help protect American taxpayers from continuing to remain on the hook and bailing them out again in the event of another financial market emergency.
Fannie Mae and Freddie Mac are America’s two largest home mortgage companies. While they do not originate any mortgages, both provide liquidity to the mortgage market by purchasing mortgages from lenders. Fannie and Freddie either hold the mortgages in their portfolio or securitize the loans into pools called mortgage-backed securities that are sold to investors.
The two GSEs wield an effective duopoly over the secondary mortgage market and currently guarantee almost $7 trillion in mortgage-related debt. Fannie Mae and Freddie Mac were congressionally chartered private companies established to encourage homeownership, but the actions taken in the wake of the housing crisis effectively put the companies under government control, known as conservatorship.
During the 2008 financial crisis, some of the mortgages bought by the GSE’s started to fail. Homebuyers were unable to meet their mortgage payments, jeopardizing the solvency of Fannie and Freddie’s mortgage portfolios. As a result, the Housing and Economic Recovery Act of 2008 placed both Fannie Mae and Freddie Mac into government conservatorship on September 6, 2008, under the newly created Federal Housing and Finance Agency. Because the conservatorship arrangement implies that the government now guarantees the loans, the American taxpayers have become the backstop of a multi-trillion-dollar loan portfolio. When Fannie and Freddie were nearing insolvency in 2008, they borrowed over $191.4 billion from the U.S. Treasury. If the housing market declines again, Fannie and Freddie can borrow the remaining amount from the $254 billion Treasury credit line left over from 2008.
Legislators and regulators did not intend for the conservatorship to be perpetual. It was supposed to be a short-term emergency measure to keep GSEs solvent and prevent further escalating the financial crisis. In 2008, FHFA Director James B. Lockhart stated that Fannie and Freddie would only be under conservatorship until they were stabilized. Similarly, the former Office of Management and Budget Director Jim Nussle considered the arrangement to be temporary.
However, Fannie Mae and Freddie Mac are entering their 13th year under federal government control. Fannie Mae and Freddie Mac have increased their loan portfolio to levels 33% higher than pre-crisis. After a decade of recovering home prices and economic expansion, the need for GSE’s to remain in conservatorship has long passed.
It is long overdue for Congress to prioritize ending the GSEs conservatorship and protect taxpayers from further remaining as a federal backstop. Americans for Tax Reform and the undersigned organizations strongly urge Congress to prioritize comprehensive housing finance reform in the 117th Congress.
Click here to review the letter.
Photo Credit: go digital