Battle royal over tax breaks

Lobbyists prepare for battle royal over tax breaks

'It will not take long for us to organize ourselves,' said one lobbyist. 'We will be ready and on standby.'

By THEODORIC MEYER

House Speaker Paul Ryan warned Republican lawmakers on Wednesday to steel themselves to hear from “10,000 lobbyists” set on defending prized tax breaks that could be on the chopping block.

Those lobbyists are getting ready, too.

The tax blueprint released by the “Big Six” Republican negotiators on Wednesday promised to hack the corporate rate down to 20 percent but included few details about which tax breaks would be eliminated to pay for their plan. So lobbyists are preparing for a flurry of business owners flying to Washington, TV ads, grass-roots campaigns and shoe-leather lobbying to defend their most cherished tax breaks.

“It will not take long for us to organize ourselves,” said James Ballentine, the top lobbyist for the American Bankers Association, which applauded Republicans’ statement on Wednesday but plans to swing into action if Congress goes after businesses’ ability to deduct interest on loans and other tax provisions. “We will be ready and on standby.”

A coalition concerned with the interest expense issue has already placed opinion pieces in local newspapers. Another group that wants to protect deductions for state and local taxes plans to mobilize teachers, firefighters and other constituents to contact lawmakers.

Republicans, under intense pressure to pass a tax bill after their failure to repeal Obamacare, released an outline Wednesday but are waiting as long as possible to divulge the full details of their tax plan in an effort to stave off the lobbying hurricane. Some lobbyists think lawmakers won’t have the stomach to eliminate enough special-interest tax breaks to pay for dramatic rate cuts.

“I can’t even imagine Republicans doing full-fledged tax reform that steps on toes,” said one veteran tax lobbyist.

Still, many tax breaks could be at risk. Cutting the corporate tax rate to 20 percent — from the current rate of 35 percent — and repealing the alternative minimum tax will cost $1.9 trillion over the next decade, according to an estimate released Wednesday by the Committee for a Responsible Federal Budget. Lawmakers will have to make up revenue somewhere if they want to avoid blowing an enormous hole in the deficit.

Most industries have at least one cherished tax provision they’re preparing to defend. Earlier this year, when a proposal known as the border-adjustment tax threatened to raise taxes on retailers, the industry ran millions of dollars’ worth of TV ads to try to convince consumers the tax would hurt them by raising prices. The campaign worked, killing the border-adjustment tax before it could get off the ground.

Some issues are harder to explain to the public.

“No one’s going to be holding up signs picketing for interest deductibility,” said Mac O’Brien, a spokesman for the BUILD Coalition, an umbrella group fighting changes to the way businesses deduct interest on their loans, which Republicans didn’t fully address on Wednesday. “It’s a little bit of a nuanced issue.”

Instead, the coalition has targeted Sen. Dean Heller (R-Nev.), a member of the Senate Finance Committee who’s facing a tough reelection fight next year, with op-eds in Nevada newspapers from local businessmen. The coalition is also pressing former businessmen such as Sens. Johnny Isakson and David Perdue, both Georgia Republicans.

The Advertising Coalition, meanwhile, is preparing to defend companies’ ability to deduct advertising spending on their taxes — a sacred provision for broadcasters, newspapers and other businesses that depend on ad revenue. If the provision appears under threat, Jim Davidson, the coalition’s executive director, said, “we’ll accelerate that and make sure that we reach every state and congressional district that members of the tax-writing committees represent.”

Republicans did signal on Wednesday that they would go after state and local tax deductions, despite opposition from House Republicans in New York, New Jersey and other blue state whose residents face the highest state and local taxes. That alarmed Americans Against Double Taxation, which formed last week to preserve the deductions.

Andrew Koneschusky, a spokesman for the coalition, wouldn’t say exactly how the group will fight the proposal. But he said the coalition’s member organizations — including the National Governors Association, the National Association of Realtors and the American Federation of Teachers — expect to press members of Congress to preserve the break.

“All of the organizations that are part of the coalition have ground troops,” Koneschusky said, from governors to teachers to firefighters.

Not every industry is preparing to go to war.

Retailers say that after they won the border-adjustment tax battle, there’s little lawmakers could propose that would scare them.

“We’re a lot less likely to be manning the barricades” than other groups, said David French, the National Retail Federation’s top lobbyist. “Our members have told us there aren’t really provisions in the tax code they want to protect. They want us to get the lowest possible rates.”

The National Association of Home Builders, on the other hand, was ready to do battle either way. They drew up ads and op-eds both supporting and opposing tax reform while waiting for Wednesday's outline.

“I don’t believe in waiting and seeing,” Jerry Howard, the association’s chief executive, said in an interview last week. “We have everything in the can already.”

On Wednesday, Howard came out in support of Republicans’ plan despite uncertainly about what will happen to the mortgage interest deduction. The pro-reform print ad campaign will start inside the Beltway as early as next week, according to the association, with TV ads to follow.

Other traditional defenders of the mortgage interest deduction — seen for decades as an untouchable tax break —declined to join them.

“We’re trying not to overreact to a press release that they throw out at the very beginning of a very long process,” Jamie Gregory, National Association of Realtors vice president, said of the homebuilders’ move. “They’re making a strategic play here to be on the positive side of the table, whereas I think we’re going to make a strategic decision that it’s time to start speaking out.”