K Street readies for tax reform fight

K Street doesn’t think Congress is messing around on tax reform.

Washington’s influence industry sees Speaker John Boehner’s (R-Ohio) designation of tax reform as H.R. 1 as just the latest sign that the issue will be front-and-center this year. 

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Accordingly, lobbyists are ramping up their outreach to Capitol Hill as lawmakers look to roll back tax breaks and lower rates for the first time since 1986.

“I was here in ’86,” said James Pinkerton, the co-chairman of the pro-reform RATE Coalition and a onetime adviser to President Reagan. “I think the signs for tax reform are better in 2013 than in 1986.”

Boehner’s H.R. 1 decision has left K Street observers even more confident that House Ways and Means Chairman Dave Camp (R-Mich.) and Senate Finance Chairman Max Baucus (D-Mont.) will have room to maneuver this year.

Jack Lew, who was confirmed on Wednesday as Treasury secretary, has said he wants to push forward on tax reform, and President Obama mentioned the issue in his State of the Union address.

Major companies and trade groups were signing up lobby firms to work on tax reform even before Boehner reserved the priority-setting H.R. 1 slot for it.

Amgen, the American Council of Life Insurers and Intel are among the companies and groups that have secured more representation this year to lobby on “tax reform” along with other issues, according to disclosure records. 

“The Speaker is sending a signal to the players that this is not Camp flying blind on his own,” said Jade West, senior vice president of government relations for the National Association of Wholesaler-Distributors (NAW).  

Camp has already released two discussion drafts dealing with complex parts of the tax code, and Ways and Means has formed 11 working groups to focus on its every nook and cranny.

Lobbyists are making contact with the working groups and hope to begin meeting with them soon.

“They are going through all of the process to identify consensus on what policies can move,” said Brian Reardon, the executive director of the S Corporation Association.

Still, far from everyone in the lobbying world is confident that tax reform will happen this year, or even before the 2014 elections. 

Industries well represented on K Street acknowledge that significant partisan hurdles remain to tax reform, especially on the question of whether the overhaul would bring in more revenue to the government. 

Lobbyists also acknowledge they are likely to play a role in gumming up the works. 

Most industries or companies argue the tax code is far too bloated and long overdue for an overhaul, while also hiring lobbyists to ensure that they don’t end up worse off once the system is revamped.

“It will take a higher degree of bipartisanship than we have seen so far,” said Rob Leonard, a partner at Akin Gump Strauss Hauer & Feld. “This can’t be one effort by one party, by one chamber of Congress or by one end of Pennsylvania Avenue.”

A Republican tax lobbyist went one step further and argued the creation of the working groups shows the odds are stacked against reform.

“The fact that they need to engage in a trust-building exercise shows how bad things are,” the lobbyist said. “These guys have almost nothing in common, policy-wise.”

Interest groups are taking nothing for granted, however, and are warning lawmakers to stay away from their favored tax preferences. 

On Wednesday, three prominent local government groups said Capitol Hill shouldn’t touch a tax exemption for municipal bond interest, which has been eyed by the Obama administration in the past.

“Curtailing or eliminating the tax exemption would raise costs for financially-strapped state and local governments and would result in less investment in infrastructure at a time when jobs are scarce and the physical state of our public works is deteriorating,” read the report from the National Association of Counties, the National League of Cities and the U.S. Conference of Mayors.

Groups backing some of the biggest tax deductions — such as for charitable giving and mortgage interest — also remain on high alert, after thinking for years that policymakers would eventually target them.

“The real critical time is when the House Ways and Means Committee puts something out,” said Jamie Gregory, deputy chief lobbyist at the National Association of Realtors. “The real test will be, what does H.R. 1 look like. That’s what the true focus will be on.”

Dozens of national and local charitable officials testified before a Ways and Means hearing this month, showing the depth of the support for the deduction within the industry.

Both Democrats and Republicans have offered ideas about how to limit the charitable deduction, but nonprofit groups such as the United Way Worldwide argue curtailing it would just transfer money from charities to the government. 

“As long as there is a sincere debate over whether Congress needs to raise more revenues, there’s going to be this prospect of tax reform,” said Steve Taylor, senior vice president and counsel for public policy at United Way Worldwide.

With so many questions left unanswered, Akin Gump’s Leonard said companies should deploy their full lobbying arsenal this year, even if a comprehensive tax reform bill doesn’t develop. 

“Even if it’s not pushed over the finish line this year, this is going to create a framework for future policy, so you are naive if you are sitting this out,” Leonard, chief tax counsel for the House Ways and Means Committee during the 1986 tax reform act, told The Hill. 

“The people who sit this out are taking a big risk of being on the losing side,” Leonard said. “It becomes a starting point for the next tax reform effort. It becomes very difficult to undo policy decisions that were previously made.”