Lawmakers Introduce Coin Composition Legislation
U.S. Senators Mike Enzi (R-Wyo.) and Maggie Hassan (D-N.H.) have introduced bipartisan legislation to allow the U.S. Mint to adjust the metal content of circulating coins in an effort to save taxpayer dollars. The Mint estimates that, by adjusting the metal content of coins, the federal government could save between $10 million and $17 million a year.
“By tweaking the metal composition of our coins, the U.S. Mint could, in the short term, create more coins amid a temporary shortage and, in the long term, save millions of dollars every year without any significant changes to the coins’ weight or appearance,” Sen. Hassan said.
The bipartisan Coin Metal Modification Authorization and Cost Savings Act of 2020 authorizes the U.S. Mint to modify the metallic composition of circulating coins if that modification would reduce costs incurred by taxpayers and have minimal impact on the public.
Congress and the Mint have reviewed coin composition a number of times over the years, based on the fact that the production cost of some coins – including the cost of the raw materials – exceeds the face value of the particular denominations of those coins.
“There have been various legislative efforts to fix that issue,” explained Coin Laundry Association President and CEO Brian Wallace. “Of course, whenever the topic of coin composition arises, our concern zeroes in on the quarter. What if there were changes made to the quarter that made it difficult to accept the new coins in current coin drops and coin slides? Or what if there were potentially two versions of quarters in circulation simultaneously with varying weight, diameter and/or electromagnetic signatures? This would be a big problem.”
In the past, the CLA has submitted comments opposing such legislation through the Federal Register, with regard to the prohibitive cost of potentially hundreds of millions of dollars that it would require to replace every coin drop and coin slide in the laundromat industry.
In addition, the fact that the quarter’s production cost remains at about 9 cents per coin, versus its 25-cent face value, emphasizes that the quarter is not the problem.
However, with renewed interest in this issue on Capitol Hill, Wallace has been in contact with the legislative staffs for both Sen. Hassan and Rep. Mark Amodei (R-Nev.), who has sponsored similar legislation in the House, expressing the laundromat industry’s concerns over these types of changes. The CLA, along with a number of vending industry associations, also has reached out to its contacts at the U.S. Mint.
The result of these discussions appears to be a re-draft of the bill, which features amended the language, authorizing the Mint to indeed consider new coin metal compositions.
However, the revised legislation would require that there be industry stakeholder engagement and that any composition changes be “seamless,” meaning that the resulting coins would be accepted in the majority of existing coin mechanisms and would not result in a major financial impact on small businesses that rely on coins.
“There doesn’t appear to be an imminent threat to the quarter,” Wallace noted. “The CLA has been talking directly with the offices of the cosponsors of the legislation, and we are working with other trade groups that also are invested in making sure any changes to coins aren’t disruptive to our respective industries.
“The language of the bill has been amended in such a way that we are comfortable with it and in a position to support it.”
The Coin Metal Modification Authorization and Cost Savings Act is likely to be considered during the current Congressional session.
CLA Opposes FTC Recommendation on Garment Care Labels
The Coin Laundry Association recently submitted comments in opposition to the Federal Trade Commission’s recommendation to repeal the rule requiring clothing to include care labels. The comments were submitted jointly, along with those of the Association of Home Appliance Manufacturers and the American Cleaning Institute.
The Drycleaning & Laundry Institute also separately submitted comments opposing the repeal, which would result in clothing manufacturers no longer being required to place care label instructions on their garments.
“We believe care labels provide important information for our self-service customers, enabling them to successfully and properly launder their garments without damage,” said CLA President and CEO Brian Wallace. “Care labels also are an important part of the very basic processing of garments at the wash-dry-fold counter. Most laundry attendants are trained to look at the care label first to identify the proper way to care for particular garments.
“If manufacturers were no longer required to include care labels, we feel the potential result very likely would be an increase in customer complaints regarding damaged garments,” Wallace continued. “And, for garment-care professionals, it would be a rather murky redress to require their customers go back to a clothing retailer or manufacturer for satisfaction over a damaged item.”
Beyond the association’s submitted comments, Wallace also took a meeting with FTC Commissioner Rohit Chopra, to discuss the matter directly and further emphasize the laundry industry’s concerns over the repeal of this rule.
“Hopefully, we’ve been able to stop the repeal of the current rule,” Wallace said, “but also perhaps motivate the FTC to revisit its current care labeling standard and to look for ways to improve it, based on today’s garments and modern cleaning methods.”
DOE Considers Changes to Commercial Washer Energy Standards
The Department of Energy recently called for stakeholder comments, as it considers the need for any changes to the energy conservation standards set for commercial clothes washers.
As a result, the Coin Laundry Association, along with the Association of Home Appliance Manufacturers, jointly submitted comments opposing any changes to the existing standards. Among the CLA’s comments, the association urged the DOE to consider the following in its analysis whether or not to amend the standards:
End-user needs: End users of commercial clothes washers want to do as much laundry as they can in as little time as possible. Generally, they also prefer to limit the loads or trips per week. This impacts the design of commercial clothes washers as discussed below.
Operator needs: Commercial operators want to maximize laundry throughput. They also want to maximize the return on capital across their base of machines. This includes having as many available clothes washers as possible in their space.
Durability: The number and frequency of cycles anticipated for commercial clothes washers is much higher than for domestic applications. Components, including motors, need to be robust and durable enough to deal with these demands. As a result, some technology options deployed in the residential context may not be suitable in a commercial setting.
Serviceability: Owner/operators require low machine downtime for malfunctions and repairs. This requires readily available parts, and easy serviceability. Some technology choices have a material impact on the ease of service.
Cycle length: Cycle time is an important consideration for end-users, who want to reduce the amount of time it takes to do their laundry, and for operators who want to maximize daily laundry throughput. That means that lengthening cycle time in order to achieve higher levels of efficiency is not a viable technology option for improving efficiency.
Drum volume: Increasing the drum volume (capacity) of a clothes washer is one of the key technology options for improving efficiency. But the ability to increase capacity for commercial clothes washers is extremely limited. Because manufacturers increased drum volume to meet the existing energy conservation standards, it may not be possible to further increase the size of the drum to comply with more stringent standards without increasing the cabinet size. Increasing the cabinet size will result in retooling, which will significantly increase costs.
Water levels: End users want to see what they believe is a sufficient amount of water to wash their clothes. Many commercial clothes washers have doors that allow users to see the water level and manufacturers sometimes hear complaints, even at current energy conservation standards, that water levels are too low. Even if smaller load sizes need to be recommended due to decreased water levels allowed by more stringent energy conservation standards, commercial clothes washer users may do larger loads, particularly if they perceive available capacity. Especially if it were necessary to further decrease water temperatures to meet more stringent standards (which would make it difficult to clean the clothes with today’s detergents), the result will likely be increased complaints to operators, decreased performance for the user, and likely the re-running of cycles, which will mean energy and water savings from amended energy conservation standards may not be fully realized.
The CLA also shared this information with its washer manufacturer members to keep them fully informed as well.
“We don’t necessarily love where the standard is right now,” explained CLA President and CEO Brian Wallace. “However, opening it up to change could be potentially worse.”
CLA Survey: Coin Shortage Continues to Plague Laundromats
The Coin Laundry Association recently solicited store-owner input on the current coin shortage, in an effort to gauge the size and scope of its impact on the industry.
Among those who responded to the association’s survey, 65 percent of the laundry operators admitted to observing a disruption in the supply of either quarters or dollar coins at their stores during the summer, “as evidenced by either a reduction in the normal supply of coins in the store and/or trouble accessing the desired supply of coins from their local bank.”
And the situation doesn’t seem to be abating very quickly. In fact, 50 percent of respondents reported observing no improvement in the supply of coins at their laundromats in recent weeks, while 45 percent of owners said they’re still finding it difficult to access coins at their local banks.
The CLA has been addressing the coin shortage in three ways.
“We’re trying to educate our members as to the status of this disruption in the coin supply, including having just conducted our store-owner survey to elicit feedback from the field,” explained CLA President and CEO Brian Wallace. “We’re also in direct and constant contact with the U.S. Coin Task Force, which was established by the Federal Reserve and the US Mint to identify, implement and promote actions to reduce the consequence and duration of COVID-19-related disruptions to normal coin circulation. We’re advocating on the industry’s behalf and providing feedback to the task force on the impact the shortage has had on the laundromat business.”
Moreover, the CLA has conducted an all-out media relations blitz to help educate the public in regard to this unique situation and its impact on the industry. In fact, Wallace has been interviewed by dozens of various media outlets, including the Los Angeles Times, the Washington Post, Slate, NBC San Diego, Fox Business, Newsday, Connecticut Public Radio and several others.
Although coins remain scarce, there is a bit of good news. According to the recent CLA survey, 26 percent of those responding said they have seen an improvement in the supply of coins at their laundromats in recent weeks.
Progressive Cities May Point to the Future of State Taxation
In the COVID-19 era, with historic budget deficits, particularly in states whose governments are controlled by Democrats, what tax policies will these states pursue? According to government relations firm MultiState Associates, a good place to look may be at the aggressive new taxes endorsed by progressive policymakers in a few major cities.
“As a general rule, Democrats do not run for office to affect the tax code,” wrote Ryan Maness, senior policy analyst and tax counsel for MultiState, in a recent article on the company’s “Insider” blog. “Republicans often come into office with plans to cut rates, expand bases or enact other business-friendly tax reforms. By contrast, Democrats typically see the tax code as a means of generating revenue for favored social programs and are less likely than their conservative colleagues to focus specifically on how the revenue is generated.”
For the past few years, within the Democratic Party, the vanguard of tax policy has played out in city councils and mayors’ offices. While some of these efforts have mirrored the “raise-taxes-on-high-income-earners” approach that many state lawmakers have considered for years, in most cases they are pushing the envelope to develop more novel approaches to raising new revenues for their cities.
In Oregon, policymakers in the city of Portland have been particularly active. Earlier this year, the Metro Council sent voters a proposition that included a 1 percent income surtax on higher-income families (levied on individual income over $125,000, and over $250,000 for joint filers), and a 1 percent net profits tax on businesses with gross receipts over $5 million. Portland residents approved the measure on the promise that it would generate $250 million annually to combat homelessness. Wasting no time, the Metro Council then sent voters another ballot measure that would raise an additional $250 million for transportation investment by levying a new payroll tax on wealthy earners. Lastly, while driven by a citizen petition effort, Portland voters in 2018 enacted a 1 percent gross receipts tax aimed at businesses with revenues over $1 billion to fund renewable energy projects.
Across the border in Washington, Seattle lawmakers have been waging a public battle with their city’s biggest businesses. Since at least 2018, a group of progressive and Democratic Socialist members of the city council have pushed for a “head tax” on local big businesses. Despite heated private sector opposition to these proposals and the opposition of Mayor Jenny Durkan, in July the council pushed through a new payroll expense tax ranging from 0.7 percent to 2.4 percent on salaries over $150,000.
Additionally, Chicago Mayor Lori Lightfoot spent much of last year gauging support for a possible tax on large law and accounting firms and taxes on high-end real estate transfers, going so far as to pitch some of her ideas to the Illinois General Assembly.
In San Francisco, city leaders have released a slate of tax-reform proposals that would replace the current payroll tax with a higher gross receipts tax, levy new taxes on “white collar” industries, create a new business pay ratio tax and double the real property transfer tax.
“In addition to raising more money for their own jurisdictions, these local tax policies also create a potential blueprint for state lawmakers to follow,” Maness stated. “In the same way that the legislative success of sales tax nexus legislation caused those bills to sweep quickly across the country, the passage of new gross receipts, payroll and business profits taxes in major cities with progressive leaders could have a similar encouraging effect on their state-level counterparts.”
States Could Tax PPP Funds
The tax treatment of Paycheck Protection Program loans continues to be a major issue for those businesses who received the loans. In addition to preventing deductibility on forgiven PPP expenses, some states are now entering the fray and saying they plan to tax forgiven PPP funds.
The original intent of Congress in passing the CARES Act, which implemented the PPP, was to allow forgiven PPP expenses to be deductible as ordinary expenses. Although IRS is exempting forgiven PPP funds from federal income taxes, they are not allowing those PPP fund expenses to be deductible as a business expense. The result is a reduction in the actual amount of aid offered to small businesses through the PPP.
The U.S. Small Business Administration’s Office of Advocacy recently highlighted another tax issue facing PPP recipients – state taxes on forgiven PPP funds. According to the Office of Advocacy:
“Twenty-one states and the District of Columbia are rolling conformity states, meaning they automatically conform to the most current IRC for both individual and corporate income taxes. Taxpayers with forgiven PPP loans in those jurisdictions will exclude the forgiven loan proceeds from taxable income at the federal and state level. Nineteen states are static conformity states, meaning that state lawmakers must vote to change their state’s conformity date.
“A Tax Foundation survey has projected that state revenues could be down $121 billion over the next two years. Because of the pandemic, states are hurting for revenue and may have no plans to update their conformity dates to rectify this glitch. Indeed, California has already stated that it plans to tax forgiven PPP loan proceeds.”
Unfortunately, efforts to tax PPP forgiven funds not only serve as an unwelcome surprise to loan recipients, they essentially take away money designed to help small businesses when it is needed most.