- Manchin is Staying in the Senate
- Congressional Hits and Misses: Week of April 13, 2015
- Wham! Bam! Comic Book Ads Target SEC Chairwoman
- Democrat Announces Senate Bid in Pennsylvania
- Context for Facebook Chatter About Presidential Candidates
For months, the Information Technology Industry Council, a trade group that represents high-tech companies, has lobbied lawmakers to approve the extension of expired tax credits for areas such as research and development.
But now that Congress is moving to consider an economic package with those tax extenders, many business groups, including the technology council, arent rejoicing.
The reason is that the Democratic leadership, under pressure to offset costs, has tacked on revenue-raising tax changes that business leaders complain could cut their bottom lines.
Some of the easiest pay-fors have been used up, said Ralph Hellmann, senior vice president of government relations for the technology council. Now you are hitting the bone. You are making changes that hurt companies competitiveness.
This week, Hellmanns group joined other prominent business organizations, including the National Foreign Trade Council and the Business Roundtable, in sending a letter to lawmakers opposing a crackdown on the use of foreign tax credits.
Their action was part of a round of furious lobbying on Capitol Hill this week over the jobs legislation that Congressional leaders say they want to complete before they leave for their Memorial Day break.
The bill, which was unveiled last week by House Ways and Means Chairman Sander Levin (D-Mich.) and Senate Finance Chairman Max Baucus (D-Mont.), is a mishmash of tax and spending measures. It includes extending unemployment benefits and health insurance subsidies, prevents Medicare reimbursement cuts for physicians and provides funding for a range of programs, including infrastructure bonds and summer jobs for young people.
The legislation also would raise the excise tax on oil production from 8 cents a barrel to 32 cents to fund the oil spill liability trust fund, which is expected to be depleted because of the massive BP oil spill in the Gulf of Mexico. Oil industry leaders said they were analyzing the increase, which they anticipated because of the spill.
House Democratic leaders spent Tuesday trying to corral their Members into supporting the $200 billion measure, which has drawn resistance from some fiscally conservative lawmakers in the Caucus. It is also unclear whether the Senate can muster the 60 votes necessary to approve the bill.
Meanwhile, outside groups have been trying to influence the final outcome, with much of the focus on the Senate, which is more likely to consider amendments to the legislation.
Among business groups, the U.S. Chamber of Commerce has taken the toughest stance against the measure, threatening to include votes on the bill in its evaluation of lawmakers records.
In a letter to House Members, chamber Vice President Bruce Josten said his group supported a number of elements in the bill, including extending the expired tax breaks, the Build America Bonds and pension relief.
But he said the benefits were outweighed by onerous tax provisions, including limiting corporations ability to use foreign tax credits and requiring that carried interest earned by venture capitalists and other investors be taxed at a higher rate.
Many of these provisions would make significant changes to long-standing aspects of U.S. tax law and policy and have never been considered in hearings or other bills, Josten said. He wrapped up the letter with a warning that the chamber may consider votes on the legislation in the chambers annual How They Voted scorecard.
The carried interest tax measure, in particular, has drawn fire from private equity firms and real estate investors who are alarmed that it would mean higher taxes for investment fund managers.
Currently, certain fund managers compensation is taxed as capital gains, which is a lower rate than if it were taxed as income. Under the bill, three-quarters of those earnings would be taxed at the higher rate.
The Private Equity Council, whose members include Bain Capital Partners, the Blackstone Group and the Carlyle Group, said the provision would change 50 years of partnership tax laws.
This punitive 157 percent tax hike on growth investment by real estate venture, private equity and other firms will hurt those companies that are most desperately in need of capital to sustain or create jobs and drive growth, Douglas Lowenstein, president of the Private Equity Council, said in a statement.
An official with the trade group would not discuss its lobbying strategy. But the organization has high-powered help in Washington. The council spent $4.2 million in lobbying from January 2009 through the first quarter of this year, according to lobbying disclosure filings with Congress. To assist in buttonholing lawmakers, the group hired four outside firms, Capitol Tax Partners and the law firms of Akin Gump Strauss Hauer & Feld, Brownstein Hyatt Farber Schreck and Sullivan & Cromwell.
Real estate groups, which have also funded multimillion-dollar lobbying efforts, sent a letter to lawmakers last week opposing the carried interest changes, arguing they would hurt the commercial real estate investment.
Public interest groups and unions, however, have applauded what they see as an effort to close tax loopholes they argue unfairly benefit hedge fund managers and companies that distort their foreign income to reduce the U.S. taxes they pay.
Citizens for Tax Justice, a liberal advocacy group, is urging its members to call lawmakers and tell them to support the legislation. The group maintained that investment fund managers are currently getting preferential treatment because their compensation is being treated as capital gains.
The result is that investment fund managers who sometimes earn hundreds of millions of dollars a year pay at lower rates than their secretaries, stated a summary of the bill on the groups website.
Organized labor, led by the AFL-CIO, is also galvanizing its members to support the legislation. AFL-CIO spokesman Josh Goldstein said lawmakers who vote against the measure risk having the unions work against them in upcoming elections. He said union members were also working Capitol Hill this week.
Were definitely in full force out there, he said.