November 14, 2016 | Vol. 66, No. 22
Dear PEI Member:
The voters have spoken. But what are the results of last week’s U.S. presidential election likely to mean for PEI members? One short week after the ballots were counted, that’s an impossible question to answer completely.
Predicting how a new president—any new president—will govern is always an inexact science. Unexpected events at home or abroad can intervene. Policies a candidate loudly proclaimed may take a backseat to more pressing needs once that candidate takes office. And even high-priority policy goals may be watered down, tweaked or radically transformed during the give-and-take of the legislative process.
But the uncertainty after this year’s election is even greater than usual.
For one thing, President-elect Donald Trump begins his transition without the clear support of all segments of his party. Some normally stalwart Republicans deserted him altogether during the campaign. Others, including Speaker of the House Paul Ryan and Senate Majority Leader Mitch McConnell, offered at best tepid endorsements. Now that the election is over, all of the major players are smiling and talking about unity. But will the new president and congressional leaders be able to come together with a consensus set of legislative priorities? We just don’t know. Yet.
Moreover, while the Republicans held both houses of Congress, their Senate majority (51 or 52 seats, depending on the outcome of a runoff election in Louisiana) falls well short of the 60 votes needed to completely control the agenda in that chamber. And intense post-election disappointment on the other side of the aisle suggests that Democrats won’t hesitate to resist Trump-backed legislation they oppose.
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But the biggest barrier to making specific predictions at this early stage is that the new administration's known legislative priorities—especially in the business realm—are few in number and lacking in much detail.
With those cautions in mind, here are broad outlines of what may lie ahead in five areas of importance to PEI members.
The incoming president has proposed a simpler tax code, with three tax brackets instead of today’s seven. A top rate of 33 percent—a substantial reduction from the current 39.6 percent maximum—would kick in at $112,500 of taxable income for singles and $225,000 for married people filing joint returns.
Childcare tax credits and an increase in the standard deduction would help many low- and mid-range earners. And Trump has pledged to eliminate a 3.8 percent surcharge on investment income added by the Obama administration to help fund the Affordable Care Act (ACA).
Business owners have the potential for even more savings. The Trump plan would reduce the corporate income tax rate from 35 percent to 15 percent. And, owners of small businesses organized as S corporations would be allowed to take advantage of that low rate—rather than having business income taxed at their (often higher) personal income tax rate, as is the case under present law.
Last, manufacturers that are willing to give up interest deductions on business debt would be able to immediately deduct capital expenses, a provision that encourages both business expansion and sensible borrowing. PEI manufacturers with a strong cash position will find this to be a significant spur to growth.
2. Wages and Hours
During the campaign, Trump came out strongly against any increase in the $7.25 per hour federal minimum wage—and it’s hard to see how the new Republican-dominated Congress will feel any different.
Even so, upward wage pressure will be a reality in many jurisdictions. Twenty-nine states and the District of Columbia have already set their minimum wages above the federal level. Last Tuesday, four of those states (Arizona, Colorado, Maine and Washington) raised their state minimum wage even more. Others are likely to follow. And as any business owner knows, increases at the bottom of the wage scale will “trickle up” to those who are higher on the scale.
3. Fuels and Fuel Storage Systems
But he spoke very little about downstream matters involving fueling, vehicles and fuel economy standards. No wonder. With the average price of gasoline at a low $2.22 per gallon during this election season, the voting public wasn’t thinking much about those issues either.
True, President-elect Trump has proclaimed his support for the Renewable Fuels Standard (RFS). What this endorsement will mean in practice, however, is less certain. Can we expect increases to the RFS biofuels targets? Relaxation of regulatory constraints on mid-level blends? Additional equipment grant programs? Continuation of the status quo? We’ll see.
His free-market philosophy and endorsement of traditional energy sources also suggest that electric vehicles won’t receive the same kind of government subsidies they did during the Obama administration. That’s welcome news for PEI members who depend largely on liquid fueling systems.
4. The Regulatory Environment
We certainly can expect that political appointees at the U.S. Environmental Protection Agency (EPA) will bring a different set of priorities to their work than did their predecessors.
However, my guess is that the biggest regulatory rollbacks on the environmental front are likely to be far removed from those with which PEI members deal every day. For example, the incoming president has specifically pledged to kill the Obama’s administration’s controversial Clean Power Plan, a proposal that would compel power companies to dramatically lower greenhouse gas emissions.
The EPA’s underground storage tank (UST) regulations, on the other hand, are well established, widely accepted in most segments of the industry, and have proved their value in the installation and operation of safe and environmentally-friendly fuel storage systems. So, it’s unlikely that the primary regulatory framework governing PEI members and their customers will be a major target in the new administration.
After such a public commitment to protectionism during the campaign, it’s hard to imagine that the new Trump administration will simply reverse course. But it’s just as hard to imagine that the new administration’s trade policies will be as severe as those promised during the campaign.
Best guess? U.S. manufacturers will gain some new trade protections and consumers may end up paying a little more for imported goods. However, other developments—like inflation and the strengthening or weakening of the U.S. dollar against other currencies—could be the primary determinants of who the big winners and losers are in the trade arena.
REGISTRATION NOW OPEN
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Attendees can choose from more than 40 separate classes to plan a program that is perfectly suited to each individual’s needs. CEOs, branch managers, sales and marketing professionals, operations managers, purchasing and inventory personnel, and manufacturers can all benefit from UID. To view the full menu of courses and register online, visit www.pei.org/uid. Note: Many UID classes sell out well in advance, so early registration is strongly encouraged.
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The TulsaLetter (ISSN 0193-9467) is published two or three times each month by the Petroleum Equipment Institute. Richard C. Long, Editor. Opinions expressed are the opinions of the Editor. Basic circulation confined to PEI members.