Tax-writers: Secrecy needed for reform

Lawmakers working on an overhaul of the tax code are prepared to negotiate in secret, away from the prying eyes of K Street, when it comes time to decide the fate of lucrative breaks and deductions.

While the top tax-writers in Congress have vowed to keep the public involved in the rewriting of the code, they say some of the work cannot be accomplished with C-SPAN cameras in tow.

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“There’s no question that there are going to be times when, to find a conclusion, you’re going to have to probably do it behind closed doors,” Sen. Orrin Hatch (Utah), the top Republican on the Senate Finance Committee, told The Hill recently.

The lead lawmakers on tax reform — Senate Finance Committee Chairman Max Baucus (D-Mont.) and House Ways and Means Committee Chairman Dave Camp (R-Mich.) — promised to lead an “open and transparent” process in a Wall Street Journal op-ed published Monday. 

“No cutting deals behind closed doors,” Camp and Baucus wrote.

The work is well underway on a tax rewrite, with dozens of congressional hearings over the last two years and plenty of input from stakeholders. But lawmakers have yet to begin in earnest the horse-trading that will be central to the process — exchanging tax breaks with powerful constituencies for lower tax rates.

When it comes time to decide which breaks live and die, lobbyists say, the talks will have to move underground.

“My sense is there will be a fairly extensive open process, but then some deal will be cut,” David Castagnetti, a former aide to Baucus who is a founding partner at Mehlman Vogel Castagnetti. “At some point, somebody has got to wrap it up, pull it all together.”

For now, lawmakers on the Ways and Means and Finance panels are holding a series of meetings that they hope will give momentum to their reform efforts. 

“You want to let as much sunshine in as you possibly can on any matter,” said Rep. John Larson (D-Conn.), the vice chairman of a Ways and Means working group on tax reform dealing with financial services. “But there are times when you get down to the tenterhooks of issues when you want to be able to have people speak their mind without fear that there’ll retribution.”

In order for tax reform to succeed, lawmakers will have to run a gauntlet of interest-group opposition that has grown stronger since the last major rewrite of the code, in 1986. 

Lawmakers are well aware that communication moves at a much swifter pace now, with Twitter and social media replacing the fax machine as the preferred method for galvanizing opposition.

Sen. Ron Wyden (Ore.), a senior Democrat on the Finance panel, said the speed of communications adds a new challenge to tax reform, because it allows interest groups to mobilize opposition with furious speed.

“Today, with the Net and social media, a special interest campaign and somebody who wants to distort some effort to reform the code — you’re not talking about a week,” Wyden said. “It’s going to be 90 minutes, and it’s going to be viral, and it’s going to be everywhere.” 

“The responses are going to be big, and they are going to be fast,” added Jade West, senior vice president of government relations for the National Association of Wholesaler-Distributors. “It’s going to be a lot different than 1986, where we barely had computers.”

Observers of the 1986 tax revamp have noted that taking discussions private helped Congress push reform over the finish line, after negotiations seemed to fall apart several times. 

Still, some K Street veterans and members of Congress believe tax reform will have to go through the regular committee process, largely in the public’s view — especially after Democratic leaders helped craft the party’s signature healthcare law several years ago. 

Other big pieces of recent legislation, like the “fiscal cliff” deal, were also largely negotiated quietly between the Obama administration and congressional leaders.

“There are going to have to be meetings, sessions and conservations that the whole world is not to going to see because you can’t get everything done with the public watching. What I think they are trying to avoid is a healthcare reform situation where a 2,000-page bill was written in secret in Harry Reid’s office,” West said, referring to the Senate Democratic leader. “I think that’s a good thing to avoid that.” 

“I think that is the lesson that the chairmen are taking,” said Pat Raffaniello, a principal at Raffaniello & Associates. “The best kind of legislation is the legislation that goes through regular order and is fully vetted.”

Rep. Kevin Brady (Texas), a senior Republican on the Ways and Means committee, added that the pace of communication would make it more difficult to keep discussions private, even if the tax-writers try to keep them hush-hush.

“At some point, whatever that first draft looks like, it’s going to energize everybody,” Brady told The Hill. “There’s going to be a lot of room for input from everybody. I mean, not just up here but throughout the country. Because communications is instantaneous.” 

Still, lawmakers and other observers acknowledge that having a public process will at times strengthen what even Camp and Baucus call the “fierce headwinds” that tax reform faces.

“There are a lot of people here who have an acute interest in what they are doing. Gucci Gulch is going to line up again,” said West, referring to the lobbying frenzy during the ’86 effort.

Democrats and Republicans also remain at crosscurrents over some of the key issues surrounding tax policy, including whether reform should raise more revenue .

“Tax reform’s difficult,” said Rep. Patrick Tiberi (R-Ohio), the chairman of the Ways and Means subcommittee that deals with taxes. “Not everybody’s going to be happy. And at the end of the day, the reason why we haven’t done this since 1986 is because you create winners and losers.”



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