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K Street rumor mill in overdrive

Washington’s tax lobbyists are in a mad scramble for any scrap of information about a long-awaited tax reform draft that will be released next week.

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They are desperate to learn what’s in the proposal from House Ways and Means Chairman Dave Camp (R-Mich.), and are eager to finally get a look at what he’s been working on for more than three years.

Camp told fellow panel members that he would release his draft next week, in what even some of his supporters acknowledge is a long shot bid at overhauling the tax code this year.

That set tongues wagging on K Street, where lobbyists admit the things they’ve heard about the draft — including rumblings that Camp was unable to reduce the individual tax rate to 25 percent — should be taken with a healthy dose of skepticism.

“It could be made out of ether. Who knows?” one tax lobbyist said. “You hear one thing’s cut, and then you hear it’s not.”

Either way, the frenzy underscores the major stake that lobbyists have in tax reform.

The business world has spent millions of dollars to ensure that their favored tax breaks aren’t given the ax in any plan to lower rates. That makes the release of the draft a big moment for K Street, even when the odds are so heavily stacked against Camp and his allies.

Lobbyists fully expect Camp to fall short on his rate-cutting goals on the individual side, where the rate now tops out at 39.6 percent. But how close Camp gets is an open question, with K Street officials saying they’ve heard anywhere from right under or around 30 percent to back to the Bush-era tax rate of 35 percent.

Observers expect the Ways and Means chairman to slash the corporate rate — now topping out at 35 percent — to at or much nearer his goal of 25 percent. In the process, many lobbyists expect the oft-discussed research and development credit to be scrapped or pared back, while depreciation schedules could also get stretched out.

Some predict that the accounting method known as “last in, first out,” which has been on President Obama’s target list in the past, could get scaled back, but not totally eliminated, in Camp’s draft.

But a deduction for interest expenses might have been spared, lobbyists say, in addition to potential changes to provisions like a deduction used by advertisers.

The breadth of speculation underscores how close to the vest Camp has kept his efforts on tax reform, the policy area he has made the central focus of his tenure as the House’s tax top-writer.

For every rumor, one lobbyist said, there are many more areas of the plan where K Street feels more in the dark. That includes many of the big-ticket tax breaks on the individual side, like the deductions for charitable giving and for mortgage interest, and the slew of targeted incentives known as extenders.

"There’s going to be tons of surprises,” said the lobbyist, who added that he didn’t expect a terribly high batting average on the rumors already circulating. “The little tidbits that are out there now are going to be dwarfed by what’s actually in the draft."

Camp declined to say if Ways and Means would mark up his tax reform plan — which many expect to be released on Wednesday — in his message to committee Republicans. Tax lobbyists openly question whether the chairman’s product will ever be slotted into the coveted H.R. 1 spot that GOP leaders set aside for it in 2013.

Still, some major trade groups aren’t taking any chances.

The National Association of Realtors, one of Washington’s lobbying behemoths, is preparing a letter laying out the group’s tax reform principles that will be sent to House members Monday. 

“We are paying attention because it could go a couple of ways here,” said Jamie Gregory, the Realtors’ deputy chief lobbyist, who said the 1986 tax reform law “decimated commercial real estate for years.”

“So we are going to be educating the members of the House on this as it goes forward,” he said.

Under pressure from GOP leaders, Camp backed away from his promise to mark up a tax reform bill in 2013.

Even before that, Republicans on his committee openly said that Camp was receiving disappointing projections from the congressional Joint Committee on Taxation, leading to suggestions the chairman was having trouble making the math work on his tax reform plan.

GOP leaders have a range of concerns about pressing ahead on tax reform, including their desire to keep ObamaCare central in voters’ minds this year, and not give Democrats an opening by pushing a bill that would whack popular tax breaks. This week, Speaker John Boehner’s (R-Ohio) office gave only the most general of support to Camp’s efforts.

That’s led lobbyists to believe that Camp and his staff might also be seeking to lay a marker for a rewrite of the tax code that happens years down the line, after he’s given up his gavel.

Camp is scheduled to be in his final term as Ways and Means chairman, with Budget Chairman Paul Ryan (R-Wis.) widely expected to succeed him in the next Congress.

“It will begin a more serious and comprehensive dialogue about tax reform,” Micah Green, Patton Boggs’s co-chairman of its financial services and tax practice, said about Camp’s draft. “What it could be is the ultimate trial balloon for the beginning of this process.”

The release of the draft could also be a boon for lobbyists who have seen their revenues decline amid the gridlock on Capitol Hill.

Some on K Street believe the business world might have grown tired of tax reform talk, given its chances this year and how long it took for Camp's draft to even be released. But others say that a detailed proposal could give a jolt to interested parties that wind up as losers in Camp’s proposal.

“This is going to be a major rainmaking event on K Street,” one lobbyist said. “This is manna from heaven.”

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