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US Democrats Propose Major Overhaul To Trade Assistance Program

by Leroy Baker, Tax-News.com, New York

16 October 2007


Senior Democratic Representatives have released a new discussion paper which proposes legislation to overhaul and expand the current Trade Adjustment Assistance (TAA) program and create new tax breaks for industry in designated 'redevelopment zones'.

Democrats say that the draft bill, released last week by the tax-writing Ways and Means Committee, is designed to better assist those affected negatively by the process of globalization, and would expand TAA coverage to more workers, while including service workers, and substantially improving training opportunities and health care benefits. The bill also creates new benefits and tax incentives for industries and communities that the Democrats say have been hit hard by trade.

"Fixing US trade policy means first and foremost retaining existing jobs, and creating new ones by opening foreign markets and establishing a level playing field for US workers, farmers and businesses," explained Ways and Means Chairman Charles B. Rangel. "But, it also means helping those affected by globalization overcome its challenges and succeed. The Trade Adjustment Assistance (TAA) program is supposed to provide that assistance; however, the program has not kept pace with globalization."

The bill includes a package of tax incentives designed to encourage the redevelopment of areas that have suffered substantial reductions in manufacturing employment. The proposal authorizes the Secretary of the Treasury to designate a group of manufacturing redevelopment zones. Under the bill, the areas designated as manufacturing redevelopment zones would be eligible for the special Work Opportunity Tax Credit classification that now applies to empowerment zones. The areas would also be eligible for tax exempt bond financing for new business; tax credit bond financing for the cost of redevelopment, including infrastructure improvements; and additional low income housing credits.

The bill also seeks to improve upon the Health Coverage Tax Credit (HCTC), first established in 2002. Democrats argue that while many trade-displaced workers are eligible for the HCTC, few have been able to take advantage of this program because coverage is unaffordable, insurance rules limit access to coverage, and the program is overly complex. In order to address these problems, the bill increases the premium subsidy to 85% and imposes rating requirements on health plans; allows eligible individuals to access their benefits sooner and links HCTC eligibility to eligibility for TAA services and benefits to minimize coverage disruptions; and removes barriers to obtaining insurance coverage. The bill provides for a limited two year authorization of the heath care benefit to give Congress adequate time to substantially reform the existing program. Individuals enrolled prior to the sunset date will be able to continue to use the benefit while they remain TAA eligible.

Congress created TAA in 1962 to provide US workers who lose their jobs because of foreign competition with government-funded training and associated income support to enable them to transition to new well paid jobs. The TAA program has been periodically reauthorized over the last 35 years, and now includes separate programs for workers, firms and farmers.

However, TAA does not cover most service sector workers, who account for about 80% of the US workforce, including information technology workers, accountants, and aircraft maintenance crews. TAA also excludes many manufacturing workers because of illogical eligibility criteria (e.g., a worker whose factory moves to Mexico is guaranteed TAA coverage, while a worker whose factory moves to China is not).

Democrats also argue that TAA is inadequately funded and that its training coverage has been artificially limited by the Department of Labor and some States’ restrictive interpretations of current law.

Rangel is reportedly planning to meet Democrat and Republican lawmakers to discuss the bill over the coming days, and the legislation is expected to reach the House floor by next month.


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