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President Barack Obama’s desire to streamline the cluttered tax code will spark a lobbying frenzy next year that could pit big business and other interests against each other as they clash over what deductions should be pruned or preserved.
Just as health care and financial regulatory reform were a boon to K Street in the past two years, a protracted effort to revamp the tax code could easily keep lobbyists fiscally flush in the 112th Congress.
“It will be the source of great focus, attention and effort on K Street,” said David Hoppe, president of Quinn Gillespie & Associates. Hoppe added that he has already been fielding questions from current and prospective clients about a tax overhaul.
While the president has said he wants to lower the rates and do away with many of the deductions, credits and loopholes, he has not fleshed out how he intends to accomplish such a simplification. The Joint Committee on Taxation lists 18 pages of these deductions ranging from widely used provisions for home mortgages and charitable giving to more targeted incentives such as those for expensing the costs of raising dairy and breeding cattle to deduction for certain film and television production costs.
Roberton Williams, a senior fellow at the Tax Policy Center, said that even though some of the provisions may benefit only a small segment of the population, the tax advantages are substantial to those affected groups. If their tax deductions are threatened, those groups will turn to K Street for help, he said.
“There will be a lot of folks marching on the Hill,” he said. “But it won’t be citizens with pitchforks.”
Many business associations have endorsed the concept of tax simplification, but they are struggling to find consensus on the details.
“This is not going to be an easy debate,” said Martin Regalia, the senior vice president for economic and tax policy at the U.S. Chamber of Commerce. “If you were going to put everyone in a room and hash this out, you better send out for a lot of pizzas.”
Regalia said the chamber’s subcommittee on tax reform has been meeting more often since the president’s commission on deficit reduction came out in November with a recommendation to overhaul the tax code. But Regalia suggested it was unlikely that the chamber would issue its own proposals for a tax overhaul anytime soon. He said that within the business community, there will be “internecine discussions if not warfare” on how to proceed with tax reform.
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The difficulty for broad-based trade groups in rallying behind a unified position on tax reform provides an opportunity for individual lobbying shops. That’s because contract firms can plead an individual company’s case on Capitol Hill, free from the murky politics of an association.
“There will be a lot of business for contract lobbyists who represent individual businesses who want to protect their individual write-offs,” said Jade West, senior vice president for government relations for the National Association of Wholesaler-Distributors.
West said it would be unlikely that the business community will have one voice on tax reform.