By Bernie Becker and Peter Schroeder - 03/03/14 06:00 AM EST
It took years for Washington’s powerhouse trade groups to elicit a real tax reform proposal from Congress — and only minutes to begin bringing it down.
The immediate blowback from industry groups to Rep. Dave Camp’s (R-Mich.) proposal illustrates how much harder tax reform becomes when details are put to paper.
“We could probably send out a press release every day on something in the tax reform bill that we are not necessarily enamored with,” said James Ballantine, chief lobbyist for the American Bankers Association.
Banking advocates and a range of other groups have acknowledged that overhauling the tax code is a massive endeavor and commended Camp for even taking it on.
But that doesn’t mean they have to like the results.
“I don’t think you could find any industry or human being walking the streets that would say tax reform isn’t needed,” Ballantine said. “Getting there will be difficult.”
For bankers, the problems with Camp’s plan include a tax on the financial institutions with more than $500 billion in assets. The banking industry is also miffed that he left a tax break for credit unions alone, a provision banks say leaves them at a competitive disadvantage.
Other industries had their own axes to grind. The oil and gas industry would lose several tax breaks it sees as crucial, and the nonprofit sector says it has concerns about changes to the charitable deduction.
Realtors and homebuilders aren’t sure about narrowing the mortgage interest deduction, previously thought to be among the most untouchable of all tax breaks.
And the National Federation of Independent Business (NFIB), the nation’s most prominent small business advocate, railed against the proposal for taxing some small businesses at a higher rate than corporations.
“You can’t have tax reform and simplification if you’re going to create a plan that sets up winners and losers,” said Brad Close, NFIB’s vice president of public policy.
That sort of response underscores the problem that Camp or any would-be reformer has in trying to rewrite the tax code: Any change from the status quo makes someone better or worse off.
The NFIB, for instance, had been one of the more vocal groups pushing for comprehensive tax reform, calling a March 2013 draft from Camp on small businesses “commendable.”
But it took roughly two hours for the group to slam Camp’s plan Wednesday, saying it would hurt the many small businesses that pay taxes through the individual system.
The problem for the NFIB was that Camp had succeeded in hitting the House GOP’s goal of slashing the top corporate rate from 35 percent to 25 percent. But the Ways and Means Committee chairman was only able to get the top individual rate — now 39.6 percent — to 35 percent, even though Camp had said it was “simply unfair” for individuals to pay more than corporations.
Camp projects that less than 1 percent of taxpayers would be hit by the 35 percent rate. But for the NFIB, it was enough to lose their support.
“The rate parity was something that has been a huge priority,” Close said. “We’re disappointed.”
Camp and other GOP tax writers have stressed that the plan released this week is a just a draft and the beginning of what could be an extended period of negotiations over tax reform.
They also urged industries to take a broader look at the plan, arguing the potential positive impact on the economy would far outweigh the loss of a few tax breaks.
But the broad range of the sectors affected, and the rapid flow of information around Washington, meant many groups felt they had to respond quickly. Some didn’t even wait for the release of Camp’s plan, going instead off of rumors and news reports about the draft.
“If you’re not out there first, if you’re out there later, you really have difficulty telling [Congress] what your concerns are,” Ballantine said.
Camp has long cast his campaign for tax reform as a fight for the average family and against a tax code he describes as littered with “special interest handouts.”
But that doesn’t mean the Ways and Means Committee chairman isn’t trying to curry favor with outside groups like the Chamber of Commerce, which has been briefed by committee aides, and the slew of corporate coalitions seeking reform.
Camp’s office circulated several dozen positive responses to the rollout of his plan, from corporate giants like Boeing and UPS to grassroots conservative groups like the Club for Growth and Heritage Action.
Other Republicans on the Ways and Means Committee acknowledge they’re not surprised to have heard from lobbyists upset by Camp’s plan. But they said the backlash could easily have been worse, and their constituents aren’t up in arms, at least as of yet.
“This is so opposite of the way Washington does business. That’s why there’s such a pushback,” said Rep. Mike Kelly (R-Pa.), now in his first term on the tax-writing committee. “Look at the whole thing and then get back to us. Let the water settle. Let it get clear again.”
“This is my 10th year,” added Rep. Dave Reichert (R-Wash.). “You come out with any new idea back in this town, and there’s always going to be someone who’s going to be critical.”
House Democrats have generally been content to let the GOP divisions over the tax plan take center stage, often giving the most general of compliments to Camp for making progress on the issue.
But top Democratic tax writers couldn’t help but point to the trade group response, noting they had long said the GOP push to slash rates to 25 percent was too ambitious.
“I do think it’s humorous that a lot of trade groups, and a lot of people, came in and said, get us to 25; we’ll give up everything,” Rep. Richard Neal (D-Mass.) told The Hill. “Early analysis indicates that wasn’t true.”