Status Quo: Food retailers want to preserve current labor and tax rules as they eye this year’s political races
Americans as a whole may still be questioning which presidential candidate is better suited to revive the country's sluggish economy, but for executives in the supermarket industry, the choice is clear: the Republicans would be better for their own businesses, which in turn would be good for the economy.
The changes in labor laws and in the tax code that have been proposed in the Democratic National Platform are an anathema to food retailers, according to industry executives and associations.
“I see a clear differentiation between the two candidates and their strategies and solutions, and John McCain and Sarah Palin's strategy is much more favorable to business,” Steve Smith, president and chief executive officer of K-VA-T Food Stores, Abingdon, Va., and chairman of Food Marketing Institute, Arlington, Va., said of the Republican presidential ticket.
Atop the list of legislation that supermarket operators fear would pass with the election of a Democratic president and with a Democratic majority in Congress is the Employee Free Choice Act, known as the card-check bill, a measure supported by unions that would make it easier for them to organize. Rather than requiring an anonymous vote through what are called “secret-ballot” elections, the EFCA would allow a union to represent workers in negotiating a contract simply by having a majority of the workers in a workplace sign cards.
The EFCA, as proposed in previous legislation, also would impose fines on employers that interfere with the voting, and would facilitate the first negotiations between the unions and the employers.
Democratic presidential nominee Sen. Barack Obama of Illinois, and his running mate, Sen. Joseph Biden of Delaware, support the bill, as well as other workplace reforms that are part of the Democratic National Platform, called “Renewing America's Promise.”
“When you look at Obama and Biden, we know that card check, the Employee Free Choice Act, is high on their priorities, and that is one of the most ridiculous pieces of legislation that I have seen in my lifetime,” Smith said. “To take votes away from people and let them join a union just by signing a card is not the American way — let people vote, and if they want to organize, so be it. We're big boys and girls, and that's the way it ought to be.”
The House of Representatives passed its version of the legislation this year in the form of H.R. 800, overwhelmingly supported by Democrats, with only a handful of Republicans crossing party lines to support it. Obama was a co-sponsor of the Senate's version of the bill, S. 1041.
John Catsimatidis, chairman of Red Apple Group, the parent of the Gristedes chain in New York City, also said he disagrees with the bill, although his stores are already unionized.
“I think the secret ballot is essential,” he told SN. “It's our way of life, and I don't think that should be changed. What are you going to do, make your employees afraid to vote against you?”
Catsimatidis, a former Democrat, has recently switched to the Republican Party and has discussed the possibility of running for mayor in New York.
Many FMI members have been quite vocal in their opposition to EFCA, according to John J. Motley III, FMI's senior vice president of government and public affairs.
“It's the ‘Un-American Act,’” he told SN, “because it takes away the secret ballot and turns it over to someone in the government to be an arbitrator of that first contract.”
He said the strong union support of Democratic candidates illustrates the importance of the issue to organized labor, and increases the likelihood that such legislation will get Democratic support in the 111th Congress.
In fact, the Democratic National Platform specifically pledges support for the legislation.
“We know that when unions are allowed to do their job of making sure that workers get their fair share, they pull people out of poverty and create a stronger middle class,” the Democratic platform states. “We will strengthen the ability of workers to organize unions and fight to pass the Employee Free Choice Act. We will restore pro-worker voices to the National Labor Relations Board and the National Mediation Board and we support overturning the NLRB's and NMB's many harmful decisions that undermine the collective bargaining rights of millions of workers.”
The EFCA legislation is so favorable to unions that Wal-Mart Stores reportedly counseled its store managers that voting for Democrats would be tantamount to inviting unionization of the company.
Motley said the concerns the industry has are that the legislation would force many of the companies that are currently not unionized to suddenly begin negotiating contracts for their workers through union representatives, and that once the unions are in place it would be impossible to reverse the situation.
Passage of the legislation, he said, very much depends on the balance of power in the Senate. With many more Republican Senate seats than Democratic seats up for grabs this year, Motley said the passage of the bill would probably require 60 Democratic Senate seats to prevent a Republican filibuster from blocking it, making the Senate races the most critical in this year's election.
Of the 35 Senate races, 23 involve Republican seats, and the loss of only five or six of those could make the difference on whether or not labor legislation passes.
“The closer we get to 60 [Democrats in the Senate], the more dangerous it becomes for the industry,” Motley said. “If we have a lot of this labor management or tax legislation that passes, it would take years to possibly undo the legislation, if you ever could. And the effect of legislation, once firms that operate as nonunion now become unionized — it would be very homogenized, and you would not have much of the innovation that you have seen in our industry.”
The Republican National Platform, by contrast, supports the secret-ballot method of union organizing that is currently in place.
“The recent attempt by congressional Democrats to deny workers a secret ballot in union referenda is an assault, not only against a fundamental principle of labor law, but even more against the dignity and honor of the American workforce,” the platform states. “We oppose ‘card check’ legislation, which deprives workers of their privacy and their right to vote, because it exposes workers to intimidation by union organizers.”
The Republican platform also pledges to enforce legislation making union finances more transparent.
In addition to EFCA, Motley cautioned that many of the other labor-friendly proposals in the Democratic platform would also be difficult for the industry to accept. The “pro-labor agenda” of the Democrats includes workplace safety rules and an effort to regulate more equal pay for women in the workplace.
“We will expand the Family and Medical Leave Act to reach millions more workers than are currently covered, and we will enable workers to take leave to care for an elderly parent, address domestic violence and sexual assault, or attend a parent-teacher conference,” the Democratic National Platform states. “Today 78% of the workers who are eligible for leave cannot take it because it's unpaid, so we will work with states and make leave paid. We will also ensure that every American worker is able to earn up to seven paid sick days to care for themselves or an ill family member. And we will encourage employers to provide flexible work arrangements — with the federal government leading by example.”
Another piece of legislation that Democrats have pledged to support as part of their national platform is the “Ledbetter” bill, which would expand the time frame to allow lawsuits to be filed based on sexual discrimination. The platform also pledges to pass the Fair Pay Act and to modernize the Equal Pay Act.
The platform also pledges to invest in women-owned and small businesses, but Tom Wenning, senior vice president and general counsel, National Grocers Association, Arlington, Va., said it is not clear how the party defines “small business” — and may in fact be referring only to “micro” businesses or start-ups.
A spokesman for the Democratic Party could not be reached for comment.
Overall, Wenning said NGA members are most concerned about the tax platforms of the two parties. Since many of the independent supermarket operators are taxed at the individual rate, he said NGA members are worried that Democrat plans to increase taxes on individuals earning more than $250,000 per year would hit them the hardest.
He also said many NGA members have been able to take advantage of the economic stimulus introduced earlier this year that allowed some small-business owners to expense certain investments, and they would like to see more such incentives for investment.
“Certainly the economic stimulus that took place in 2008 was important in terms of giving our members the opportunity to expense more property, and as you look at future policy, there is more talk of those kinds of things from Sen. McCain than there is from Sen. Obama,” he said.
Perhaps the biggest economic issue of concern for the industry, however, is the estate tax, known in the industry as the “death tax.” It is the tax paid on inherited wealth, and is of concern to small-business owners seeking to pass their companies on to the next generation of family members.
Although the tax is being slowly phased out before its scheduled reinstatement in 2011, the two presidential candidates differ on how they would seek to reshape it.
“Republicans have been supporting a higher level of exemption for estates than the Democrats, and that's important to our family-owned business members if there is going to be legislation to replace it before 2011,” Wenning told SN.
While McCain, of Arizona, has proposed a 15% rate on the estate tax with an exemption of inheritances under $5 million for individuals ($10 million for couples), Obama has discussed returning to a 45% rate with a $3.5 million exemption for individuals ($7 million for couples).
“To keep taxes low, to be able to have estate tax reform and make the death tax permanent, is important to independent and regional retailers, and I think Republicans certainly have a commitment to do that,” said Smith of K-VA-T. “I think that obviously would be favorable for us.”
In addition, capital gains taxes are another significant issue for the industry, according to Motley of FMI.
“It's important to owners of companies, as well as stockholders in companies,” Motley said, noting that McCain favors preserving the capital gains tax at 15%, while Obama has discussed raising it.
Additional rumblings in the House about eliminating so-called LIFO (last-in, first-out) inventory accounting to more closely align with international accounting methods could also result in higher taxes for companies, Motley pointed out. It has been discussed by Rep. Charles Rangel, D-N.Y., and the Securities and Exchange Commission has been considering the change for some time.
“So you have a dramatic increase in taxes if Obama gets elected, and in particular if he supports what Democratic leaders, particularly in the House, want to do,” Motley said.
Each of these potential tax increases has FMI members worried, he explained.
“That's the economic platform from my standpoint,” Motley said. “You could talk about things like energy credits, but those are minor issues compared with the big ones.”
Smith noted that with Democrats seemingly destined to control both the House and Senate, the government might be more balanced with a Republican in the White House.
“I think most of us agree that the country operates better when we have a balance in Washington, and it's certainly scary to think that the Democrats have a control of the House and possibly the Senate and also the presidency.
“The thing I like about John McCain is that to get things done in Washington, you certainly have to have some bipartisan efforts, and he offers by far and away the best chances of getting some bipartisan work done, because certainly Obama is very partisan — Republicans have seen that in the Senate. You do like to see things get done, and that's not going to happen unless you've got someone that's willing to work across the aisle.”
He said he thinks EFCA is the biggest issue at stake, and “the one that resonates across retailers.”
“The Democrats want it, and if Obama gets in, they may get it,” he said. “I think taxes are a second big issue, and there are other regulatory issues. I think most businesspeople are good stewards of our environment, and while we do need some regulations, we don't need regulations that make doing business almost impossible. I worry that bigger government will make business and commerce more difficult.”
Smith is also a fan of McCain's surprise choice for running mate, Alaska Gov. Sarah Palin.
“I come from a small town, and I think some people in this country sell small-town people short,” he said. “She'll have a steep learning curve — I think a lot of women can appreciate that she's been a mom and run a city government and a state government. She's a remarkable person in my mind.”
Jack Brown, chairman and CEO, Stater Bros., San Bernardino, Calif., also said he thinks the selection of Palin was a good one for the Republican Party, which he supports because of its pro-business agenda.
“I think we have very clear choices, and what is important in this election is to make America work,” he told SN. “I think it's clear in this election that John McCain is the one that is going to put America back to work, and allow businesses some relief in order to expand.
“I have often wondered what it would be if every small business added just one employee — it would be far greater than if we read about General Motors opening a plant somewhere.”
He said he thinks the McCain-Palin ticket would bring a strong advocacy for small-town businesses.
“Half the supermarkets in America are family stores — they are owned by people who have three stores or less,” he said. “We like to think that we have 165 stores serving 165 different communities, and for that reason I believe that Sen. McCain's experience and dedication to America is best for the country.
“I think there's no doubt that higher taxes are what the Democratic Party is bringing to the table.”
The looming issue of health care reform also is important to supermarket operators, as the two parties work out how to pay for Americans' rising medical costs and reduce the ranks of the uninsured.
“The issues that involve the changing demographics of the country — not only Baby Boomers retiring, but health care for the uninsured and so forth — those are macro-issues that the new president and Congress will have to address,” said Wenning of NGA. “That will be a big question as you look to the upcoming presidential and congressional debates. How do you pay for these things, and how do you provide coverage and the benefits that come with that?”
The Democratic National Platform seeks to provide insurance for every individual in America through a broad range of plans and the option of a federally funded insurance plan.
“Health care should be a shared responsibility between employers, workers, insurers, providers and government,” the platform states. “All Americans should have coverage they can afford; employers should have incentives to provide coverage to their workers; insurers and providers should ensure high-quality affordable care; and the government should ensure that health insurance is affordable and provides meaningful coverage.”
Republicans, by contrast, advocate preserving the current system with some minor changes, including tax incentives for lower-income Americans to buy their own insurance and laws that make it easier to take both health insurance and pension benefits from one employer to another.
“Radical restructuring of health care would be unwise,” the platform states. “We want all Americans to be able to choose the best health care provider, hospital and health coverage for their needs. We believe that real reform is about improving your access to a health care provider, your control over care and your ability to afford that care.”
One issue that Democrats have sided with the industry on is the regulation of credit-card interchange fees, which retailers complain have been rising through the collusion of credit-card companies.
Congress has introduced legislation addressing the issue, and industry associations said it has received some bipartisan support.
“That's still a high priority, and it's something NGA has supported this year both in terms of speaking with members of Congress and supporting the legislation that moved through the House,” said Wenning. “I think having Democratic control in the House Judiciary [Committee] helped, but I think the vote illustrated that this is a very bipartisan issue in which both Democrats and Republicans joined in support of retailers in acknowledging that there is a problem with credit-card interchange fees — there were 10 Democrats and nine Republicans that joined in support of the bill.”
Motley of FMI said the issue would probably have a better chance of moving forward in a Democratically controlled government, however.
“It is likely we could get a sympathetic ear in an Obama administration for possibly making some changes in how the credit-card companies pay for what they do for their customers, which is very important,” he said. “McCain, from everything we can find, really doesn't have much of a position, and my guess is that it would be a real wrestling match within the McCain camp to put those kinds of limitations on the financial services community.”
Wenning said food safety is another issue that has received bipartisan attention, as several industry associations have called for providing more funding for the Food and Drug Administration.
“There are legislative initiatives that NGA supports, such as giving additional resources to the FDA to support their inspection and their technology resources in order to assure greater food safety, as well as greater resources for the inspection of imports,” he said. “We have also supported the idea of having FDA authority for mandatory recalls if voluntary recalls are refused.”
The industry's concerns, he said, revolve around the possibility that additional fees could be charged to businesses for inspections.