With Billions at Stake in Tax Debate, Lobbyists Played HardballOn December 16, 2017 by Ilene
In all, more than half of the 11,000 registered lobbyists in Washington reported working on tax-related issues through the first nine months of the year, according to a report released this month by the nonprofit group Public Citizen.
The tactics range from boring to brass-knuckled.
When a lobbyist for the travel industry wanted to kill an amendment to the tax bill sought by Delta Air Lines over concerns it would dampen United States tourism, he emailed Republican tax writers with links to a series of posts written by consultants who have worked with Delta that were sharply critical of President Trump.
The travel industry was concerned that the Delta amendment would depress international travel to the United States because it would impose a tax on foreign airlines that American carriers contend are subsidized by the governments of Qatar and the United Arab Emirates.
The implication from the emails — one of which arrived under the subject line, “Delta Lobbyists: RESIST” — was that Republicans should not reward a company whose representatives were bad-mouthing the party’s leaders.
In fact, none of the anti-Trump posts were actually written by Delta lobbyists, but rather by consultants working for a coalition that includes Delta and other United States-based airlines.
The two-page provision sought by Delta had been inserted into the bill passed by the Senate Finance Committee by Senator Johnny Isakson, Republican of Georgia, where Delta has its headquarters.
His amendment would have assessed corporate taxes on income generated in the United States by foreign airlines based in countries that restrict access to United States carriers. The proposal would have generated an estimated $200 million over the next decade, according to an estimate by the congressional Joint Committee on Taxation. The provision was removed by the Senate parliamentarian for technical reasons before the bill passed the Senate this month by a vote of 51 to 49.
The emails provide a window into a frenzy of aggressive last-minute lobbying in the run-up to an agreement reached by Republican leaders on Wednesday on a sweeping overhaul of the nation’s tax code.
Business lobbying heavyweights, including the U.S. Chamber of Commerce and the Business Roundtable, had pushed hard for the signature reform in the overhaul — drastically lowering the corporate tax rate to 21 percent from today’s 35 percent rate. But they also prevailed in extracting additional changes from the conference committee, including the repeal of a corporate alternative minimum tax that had been included, unexpectedly, in the Senate bill.
The Business Roundtable, desperate to remove the corporate alternative minimum tax, worked behind the scenes, calling lawmakers and raising concerns about how it would effectively kill the ability of companies to utilize the prized research and development tax credit. Companies that try to use tax breaks to lower their effective tax rate, like that tax credit, would face the 20 percent alternative minimum tax, largely nullifying the value of incentives that are supposed to promote research by allowing firms to write-off those expenses.
Other groups went public, including the U.S. Chamber of Commerce, which devoted two blog posts to denouncing what it called the “bombshell” inclusion in the bill.
Lawmakers got the message quickly, lobbyists said. “There was a clear understanding within a short period of time that this was a problem,” said one business association official.
A group funded largely by pharmaceutical companies enlisted families struggling with rare diseases as part of a lobbying campaign to press lawmakers to retain a tax credit for developing medicines that treat conditions affecting fewer than 200,000 people. The conference committee’s treatment of the so-called orphan drug tax credit — which would have been eliminated by the House bill but protected by the Senate bill — was still unclear as of Friday morning.
Paul Melmeyer, the head lobbyist for the National Organization for Rare Disorders, said his group is not sure of the fate of its signature issue, but added of lawmakers, “We’re confident that they’ve heard our voice.”
An ad hoc coalition fighting to save a state and local tax deduction found itself largely on the losing end of the process.
Americans Against Double Taxation was among the first significant players to come out against the conference committee’s bill because of its cap on the state and local tax deduction. The group had registered to lobby Congress directly, while also paying for phone banks and digital ads to pressure 21 House Republicans, including those from high-tax states such as California and New York, whose constituents would be hit hardest by repealing the deduction.
The coalition objected to versions of the tax bill that passed the House and Senate that substantially rolled back that deduction by capping the tax break at $10,000 and limiting it to property taxes only. And on Thursday, it registered its opposition to a compromise brokered in the conference committee allowing a $10,000 state and local tax deduction, split between property and either income or sales taxes.
The compromise “does virtually nothing to alleviate the severe cost imposed on middle-class families caused by the partial elimination,” the coalition said in a statement issued Thursday afternoon.
The coalition, consisting of groups representing state and municipal governments, as well as powerful labor unions and the National Association of Realtors, urged lawmakers to vote against the conference report.
As of Thursday afternoon, the Realtors were waiting to take a formal position on the conference committee bill until they had a chance to thoroughly review the final language. But they waged a multifront battle to shape the language right up to the last minute.
In a letter sent Tuesday, they urged congressional leaders to protect the popular mortgage interest deduction, the state and local income tax deduction and a provision effecting when homeowners need to pay capital gains taxes after selling a primary residence.
The Realtors’ approach focused on “having members of the conference who are sympathetic, reach out to the conferees,” said Jamie Gregory, a deputy chief lobbyist for the association.
The deal reached by the conference committee would cap the deduction for interest on mortgage debt at $750,000 for newly purchased homes, a higher cap than the $500,000 limit in the House-passed bill but lower than the $1 million limit that currently exists and remains in the Senate-passed bill.
No matter how convincing the policy analysis or how steady the constituent pressure, though, personal and financial connections to policymakers remained among the most important currency on K Street during the tax debate, as has been the case in legislative battles for decades.
Fund-raisers held by members of the conference committee during the tax reform debate were hot tickets for tax lobbyists, who eagerly forked over a few hundred — or even a few thousand — dollars for face time with lawmakers who controlled the fate of valued loopholes.
Mr. Portman has held fund-raisers in recent weeks, and has another one scheduled for next week at the fashionable Charlie Palmer Steak restaurant across the street from the Capitol. Attendees are being asked to donate $1,000 each through their political action committees or $250 in personal funds, according to an invitation, which bills the event as a “birthday breakfast” for Mr. Portman, whose birthday is the day before the event.
A Republican who attended a fund-raiser late last month for another member of the conference committee, Senator John Cornyn of Texas, said several lobbyists asked the senator about tax reform. Mr. Cornyn kept his responses vague, telling attendees that he was hopeful that the process could be completed before Christmas.