By Peter Schroeder and Bernie Becker - 06/06/13 09:00 AM EDT
Lobbyists all over Washington are working furiously to get their tax breaks on a special list being kept by Congress’s top tax-writers.
Senate Finance Committee Chairman Max Baucus (D-Mont.) and House Ways and Means Committee Chairman Dave Camp (R-Mich.) plan to rebuild the tax code from scratch, lowering rates and eliminating breaks in the process.
Camp described it in recent weeks as a “blank sheet” approach to tax reform, while Baucus said last year that every tax break “needs to prove it has a tangible benefit to our economy or society.”
“If not, it doesn’t belong in the tax code,” the Montana Democrat argued.
“It changes the question that we have to answer,” said Ryan Donovan, a lobbyist for the Credit Union National Association (CUNA), which wants to preserve the tax-exempt status for credit unions.
Credit unions used simply to have to show their tax exemption was proving useful, he said. Now they have to explain why it needs to exist at all.
Jade West heads a coalition to protect the “last in, first out,” or LIFO accounting method that has been targeted for repeal by President Obama. LIFO allows companies to assume that the items they sold were acquired the most recently, allowing for a smaller taxable income. Obama’s recent budgets have called for repealing the break, which could cost companies at least $70 billion over a decade.
West, senior vice president of government relations for the National Association of Wholesaler-Distributors, said she’d be more concerned about the blank sheet approach if her coalition hadn’t been up and running for years.
But backers of less prominent tax breaks that could get lost in the shuffle have reason to worry because they need to grab attention quickly, she said.
“It’s a very different sales approach,” West told The Hill. “I would be concerned about demonstrating that the tax provision that I’m defending has a broad range of support and impact.”
The blank sheet approach has perks for lawmakers, who don’t have to seek out breaks actively for elimination.
“What we’re trying to do is set up a framework where we don’t take the current tax code and see what individual thing we pull out,” Camp said in the NPR interview. “But we take a blank piece of paper and start over.”
Rep. Patrick Tiberi (R-Ohio), a subcommittee chairman on Camp’s panel, said he didn’t mind if K Street feels a bit antsy about having to go on offense.
“That’s the whole point,” Tiberi told The Hill. “It helps educate us. And I think it helps groups to try to get them to understand they need to tell people why their provision’s important.”
Trade groups are launching new websites and formulating economic studies to make the case that their break would be missed. CUNA, for example, is launching a grassroots campaign, imploring credit union members to tell Congress not to tinker with the industry’s exemption.
“In that kind of scenario, you just get swept up,” CUNA’s Donovan said. “That’s why we’re starting early.”
Some groups see a silver lining to the tax reform debate. They argue temporary provisions that must constantly be defended during regular debates to extend them could be made permanent.
Bob Rapoza of the New Markets Tax Credit Coalition said his group was bolstering its case for a favored credit aimed at sparking investment in lower-income areas. The group argues the tax credit helps businesses hurt by reduced federal spending.
The group most recently pressed its case in a report outlining the credit’s benefits that included a special section on the tax reform debate.
“Tax reform provides a legislative vehicle for a permanent or indefinite extension of the [tax credit] and an end to the waiting game,” said the report, released Wednesday. “However, it is worth noting that tax reform is not without peril.”
Some lobbyists say the talk of a blank sheet is overblown.
They argue that for all of Camp and Baucus’s talk of starting from scratch, much of the existing tax code — including breaks for mortgage deductions, student loans, and business research and development — is likely to be kept.
“That’s great in theory, but the reality is you’ve got a tax code that’s in existence that is probably more of a starting point than just a plain sheet of paper,” said Dave Koenig, vice president of tax and profitability for the
National Restaurant Association.
“I think they’re sincere in wanting to start from scratch, but … I don’t think you can ignore what is currently in the tax code.”