Supercommittee’s tax menu causes heartburn for K Street

The lobbying smorgasbord that was supposed to be the congressional supercommittee is giving heartburn to many on K Street.

Chatter that the deficit panel is targeting tax deductions has anxious lobbyists scrambling for news about the secretive panel’s negotiations. 

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A proposal from Sen. Pat Toomey (R-Pa.), one of the members of the panel tasked with cutting the federal budget by at least $1.2 trillion, would reduce tax deductions to help lower individuals’ tax rates, according to reports. 

That plan, if adopted by the supercommittee and sent to Congress, would likely send several powerful lobbying groups into a full-on blitz to protect their favored tax deductions, which could include incentives for charities, mortgages and college tuition.

Jade West, senior vice president of government relations for the National Association of Wholesaler-Distributors, described K Street’s mood as “on edge” because so little is known about the supercommittee’s dealings.

“There’s a sense of unease, because we haven’t a clue what’s going on behind those closed doors,” West said. “You can’t lobby for or against it, because you don’t know what it is.”

Democrats on the panel have offered their own plans to reduce the deficit, the latest of which included $1 trillion in revenue. Their GOP counterparts rejected that proposal as not serious but have signaled they might be open to raising some tax revenue in exchange for across-the-board rate reductions.

The supercommittee has given the cold shoulder to many on K Street, and inquiries made with the panel’s members are often left unanswered.

Many lobbyists confessed that they couldn’t comment directly on the supercommittee’s dealings because the flow of information from inside the meeting room is so limited.

Steve Taylor, United Way Worldwide’s senior vice president and counsel for public policy, said his group is pushing to make sure the charitable tax deduction doesn’t fall victim to a deficit deal.

“We haven’t been able to get anyone, at this point of time, to take it off the table,” Taylor said. “That is what we are really hoping for.” 

Coupled with expected steep cuts to social programs financed by federal funds, reducing the charitable deduction will be “a double-whammy” for charities, Taylor said. He added that his group hasn’t been able to confirm the details of Toomey’s proposal but has reached out to the senator’s office through United Way’s Pennsylvania affiliate.

“If this is what you’re talking about, Sen. Toomey, we want to be sure you know about the ramifications,” Taylor said.

Several different deficit panels have eyed the mortgage deduction over the past year. Changing the deduction would be met with fierce resistance from groups such as the National Association of Realtors (NAR) and the National Association of Home Builders, which are major players in the lobbying world.

NAR spokeswoman Stephanie Singer said she couldn’t comment on “hypothetical scenarios” but did repeat her group’s strong support for the mortgage interest deduction.

“It has always been NAR’s position that the mortgage interest deduction is a cornerstone of American homeownership, and making any changes now would further disrupt a fragile housing market,” she said.

Toomey’s reported proposal did draw kind words from other business groups.

Chris Walters, senior manager of legislative affairs for the National Federation of Independent Business (NFIB), said Toomey’s proposal would keep the George W. Bush tax rates in place permanently, which would be great for small businesses.

“That would be a favorable thing for small-business owners. That would make it easier for them to plan and easier for them to understand what their tax liability will be,” Walters said. “Business owners need permanency in order to make long-term decisions.”

But it’s also not clear to the NFIB whether any tax deductions — such as Section 179, which allows taxpayers to write off business expenses on their income taxes — would be reduced or eliminated under Toomey’s proposal.

“We certainly wouldn’t want to see any business expensing deductions end up on the table,” Walters said.

New taxes could emerge out of the supercommittee as well.

President Obama proposed to the panel placing new fees on airports and airline security to help pare down the debt, which the panel has considered proposing itself. But that will meet heavy resistance from airline companies.

Steve Lott, a spokesman for the Air Transport Association, said the tax proposals regarding the aviation industry under consideration by the supercommittee are “punitive.”

“We hope more reasonable heads will prevail, because they’re targeting the wrong industry that wants to grow new jobs and add new services,” Lott said. “Adding this tax will have the opposite effect.”

The airlines’ trade group has lobbied hard against the proposed taxes, handing out barf bags with the slogan “Sick of Taxes?”

“Regardless of Republican or Democrat, we’re surprised that any member would consider adding to the tax burden of the airline industry and its passengers,” Lott said.

Bernie Becker contributed to this report.