Trump tax plan to trigger lobbying frenzy
The Trump administration’s release of a tax reform plan is setting off a lobbying frenzy that could be unlike anything seen in Washington since the passage of ObamaCare.
Treasury Secretary Steve Mnuchin and White House economic adviser Gary Cohn on Wednesday unveiled what they called the biggest tax cut in American history, with a goal of getting legislation to President Trump’s desk by the end of the year.
“President Trump has made tax reform a priority, and we have a Republican Congress that wants to get it done,” Cohn told reporters at the briefing on Wednesday. “And this is something that, quite honestly, I hope the Democrats would support, too, because it’s good for the American people.”
The one-page White House outline sets down significant markers for the tax reform debate, offering sweeping parameters for changing the tax code for both individuals and businesses.
Mnuchin and Cohn declined to delve into specifics about parts the plan, suggesting that much of it is open to negotiation.
That’s where the lobbyists come in.
The White House said it plans to hold “listening sessions” on tax reform during the month of May, with companies and business groups invited to offer their suggestions and feedback.
Those listening sessions are likely to send groups running to the White House and Capitol Hill to try and protect their favored policies, tax breaks and deductions.
“Release of the Trump outline unleashes a flood of advocates to help fill in the gaps and propose ways to resolve differences between the Trump plan and the Blueprint,” said Russ Sullivan, a partner at McGuireWoods who served as the staff director for the Senate Finance Committee for nearly a decade, referring to a House Republican blueprint for tax reform.
“The conference rooms on Capitol Hill will be booked through May, at least,” he said.
Tax credits have long been a lucrative niche in the lobbying industry, with companies fighting over the years to keep their prized tax deductions.
“The push for tax reform is welcome, exciting news, and the lack of specificity can either excite or disappoint any number of clients, but that’s a good thing for contract lobbyists,” said a Republican leadership staffer now on K Street. “It leaves a lot of room for optimism. Everyone is potentially getting what they want because there’s no clarity or definition to it.”
Lobbying on tax reform picked up after Republicans won control of Congress and the White House in last year’s election, with President Trump and Republican leaders naming it as one of their top agenda items.
Lobbying registrations that reference tax and IRS issues are more than double the amount they were at this time last year, according to a tally by The Hill. Roughly 259 corporations and entities hired lobbyists from January through April to work on taxes, while just 124 did so in 2016.
That number will only increase — as will the intensity of the lobbying — as the details of tax reform are hammered out.
While the White House’s tax reform outline adopts some elements of the plan from House GOP leadership, there are many unanswered questions and pieces yet to be filled in.
The White House plan would double the maximum standard tax deduction Americans can take to $25,200, while axing all itemized deductions except those for mortgage interest and charitable deductions.
On the business side of the tax code, the plan would reduce the corporate rate from 35 percent to 15 percent, in line with Trump’s promise during the campaign. The White House proposal allows “pass-through businesses” — which includes everything from small businesses to law firms and real estate empires — to take advantage of the reduced rate.
Wealthy individuals would not be able to register as pass-through entities — like limited liability companies — in order to take advantage of the tax cut, Mnuchin said.
The White House’s outline does not include a border adjustment tax, however, one of the central elements of the House’s tax reform plan. (House Republicans have been looking to the border adjustment tax on imports to help pay for tax reform, but the proposal has fierce opposition on K Street.)
Mnuchin assured reporters that the tax reform plan signed by Trump would ultimately be revenue-neutral, setting up a fierce battle over which credits, breaks and deductions are eliminated and scaled back.
Early fault lines are already emerging.
The GOP is now broadly moving toward the elimination of the deduction in the individual code for state and local taxes. That idea is sure to be opposed by many mayors and governors, particularly those hailing from high-tax states like New York and California.
The White House’s plan also promises to “eliminate tax breaks for special interests,” likely referring to industry-specific credits and deductions.
Industry groups moved quickly Wednesday to defend their favored parts of the tax code.
The National Association of Federally Insured Credit Unions (NAFCU) released a statement shortly after the White House press conference espousing the benefits of the tax exemption enjoyed by credit unions, promising to “remain engaged with the administration and Congress… to ensure credit unions are protected.”
Realtors and homebuilders, meanwhile, expressed concern that the president’s tax plan would essentially eliminate the benefits of the beloved mortgage interest deduction.
“Doubling the standard deduction could severely marginalize the mortgage interest deduction, which would reduce housing demand and lead to lower home values,” said Granger MacDonald, chairman of the National Association of Home Builders (NAHB) and a homebuilder and developer from Kerrville, Texas.
The National Association of Realtors said while the tax plan is well intentioned, it is a “non-starter” with the real estate industry.
With the standard deduction of more than $25,000 in Trump’s plan, many lower and middle-income families would not be enticed into buying a home for the tax credit, the group said, because so few people would itemize on their taxes.
Yet the initial response from corporate groups has been overwhelmingly positive, with the National Federation of Independent Businesses and the U.S. Chamber of Commerce, which represent companies small and large, respectively, praising the rollout.
“As an advocate for pro-growth tax reform, the U.S. Chamber welcomes the White House’s strong push today to advance tax reform. We’ve got a once-in-a-generation chance to do tax reform, and if we do it right, it can be the single most important step our leaders take to drive economic growth,” said Chamber chief executive, Tom Donohue, in a statement.
“To get this done, it will take leadership from the White House, hard work and compromise in the House and the Senate, and engagement from the private sector,” he said. “We hope this action today from President Trump and his team will advance the national conversation so we can get on with reforming our outdated tax code.”
Vicki Needham contributed.
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