Congress

Democrats prepare to duel McConnell over year-end wish list

Amid push for legislation benefiting Kentucky constituents, Dems seek their own concessions

Senate Majority Leader Mitch McConnell is pushing several initiatives to benefit his constituents, including renewal of tax breaks for bourbon distillers, aid for retired coal miners and appropriations to bolster Kentucky’s hemp industry. (Bill Clark/CQ Roll Call)

As former Sen. Wendell Ford often said, with small variations: “Kentucky is beautiful women, fast horses, bourbon whiskey, cigarettes and coal. I represent Kentucky, and that’s what I represent.”

The colorful Ford, a Democrat who died in 2015, had little else in common with Mitch McConnell, the stoic Kentucky Republican who served as the junior senator from the Bluegrass State alongside Ford for 15 years until the latter’s 1999 retirement. But the Senate majority leader is clearly taking a few pages from Ford’s playbook in the year-end legislative scramble as he heads into a potentially difficult reelection campaign in 2020.

McConnell is pushing several initiatives to benefit his constituents, such as renewal of tax breaks for the thoroughbred horse racing industry and bourbon distillers; aid for retired coal miners in danger of losing pension and health care benefits; and appropriations to stem the tide of invasive Asian carp infesting Kentucky waters and bolster the hemp industry, among many other line items in fiscal 2020 spending bills.

“I’m proud to use my position as Senate majority leader to deliver for Kentucky,” McConnell said in an Oct. 31 statement after a four-bill spending package, including the Asian carp and hemp funds, passed the Senate. He also highlighted his membership on the Appropriations Committee. 

Democrats are well-aware of McConnell’s legislative priorities and are busy trying to extract their own concessions in return, Rep. Andy Barr, a fellow Kentucky Republican and McConnell ally, said in an interview. Ways and Means Chairman Richard E. Neal, D-Mass., left out a thoroughbred racehorse depreciation provision from his tax extenders bill for instance, which sources said was partially intended as a bargaining chip in talks with McConnell.

“That’s why all of this stuff gets thrown in there,” Barr said. “Because everybody here, including the chairman of the Ways and Means Committee, they know that Mitch McConnell is going to bat for Kentucky.”

“[Democrats] want him to expend his political capital … in order to help Kentucky interests,” added Al Cross, director of the Institute for Rural Journalism and Community Issues at the University of Kentucky. Coal miners, for example, “get a lot of sympathy vote” in the state, he said.

‘Solid Republican’

McConnell’s race against Democrat Amy McGrath, a retired Marine Corps fighter pilot, isn’t considered highly competitive: Inside Elections with Nathan L. Gonzales rates it Solid Republican. President Donald Trump won Kentucky by nearly 30 points in 2016, and McConnell won his 2014 race against Democrat Alison Lundergan Grimes, the Kentucky secretary of state, by nearly 16 points. 

But McGrath came within 10,000 votes, or roughly 2 points, of knocking off Barr in the 2018 midterms in a district the Republican had won by 22 points two years earlier. And McGrath is closing on McConnell in the money chase, with $6.7 million in cash on hand to McConnell’s $9 million, according to the Center for Responsive Politics.

Meanwhile, McGrath has been hammering McConnell this year for inaction on coal miners’ health and pension benefits. He eventually signed on to legislation introduced the day after Election Day this month in Kentucky, where GOP Gov. Matt Bevin lost a close race to Democrat Andy Beshear. The measure would protect pensions for about 92,000 retired miners in multiple states, including Kentucky, who are in danger of losing benefits because of industry bankruptcies and also prevent the loss of health insurance coverage for about 13,000 retirees. 

McConnell signed off on the bill before election results started coming in, according to West Virginia Democratic Sen. Joe Manchin III, the measure’s lead sponsor. In a key concession to Republicans and the coal industry, Manchin agreed to drop a provision restoring a higher coal excise tax that had lapsed at the end of 2018. 

McGrath has also sought to tie McConnell to Trump’s trade war and the adverse impact it’s having on Kentucky workers. She tweeted this week about “Mitch’s failure” to rein in the administration’s steel and aluminum tariffs, which led to European Union retaliation, including a 25 percent tariff on Kentucky bourbon, for example.

[Protesters rally outside Sen. McConnell’s home in Kentucky]

Senate Finance Republicans have been working on a bill that would check Trump’s ability to impose tariffs on national security grounds, but McConnell hasn’t yet blessed the effort, in part because it’s unlikely Trump would sign it.

McConnell’s been banging the drum for months to dislodge the U.S.-Mexico-Canada free trade pact, which would benefit bourbon exporters whose fifth- and eighth-largest markets are Canada and Mexico, respectively, according to the Kentucky Distillers’ Association. 

McConnell has also singled out the USMCA’s auto provisions, which could bolster the fortunes of workers in the state’s Ford, General Motors and Toyota plants by requiring higher wages for Mexican autoworkers as well as a higher share of automobile component production in North America. 

The pact is currently the subject of negotiations between the Trump administration and House Democrats, who would originate the USMCA implementing legislation when it’s submitted.

Horses and bourbon

McConnell has introduced legislation that would make permanent a provision from the 2017 tax code overhaul allowing bourbon and other distillers to deduct the interest costs of aging their product from the time it goes into the barrel as opposed to the much later date of when it goes into the bottle.

That provision expires at the end of this year, and House Democrats proposed only a one-year extension. The aging provision is part of a package of excise tax breaks aimed at small breweries, wineries and distilleries. The aging provision, though, is aimed at larger companies able to borrow large sums and whose products are aged from two to 20 or more years.

“Vodka has a competitive advantage over us because they can recoup the interest immediately because there’s no aging,” said Barr, who’s introduced a similar House bill with other Kentucky members.

The racehorse depreciation provision, included in the Senate version of tax extenders legislation but not Neal’s bill, would allow owners to depreciate thoroughbreds up to two years of age over a three-year schedule instead of seven, allowing taxpayers to deduct more costs upfront.

Neal’s office noted that the 2017 tax law included a provision that allows businesses, including those investing in horses, to fully and immediately write off their investments. However, full expensing starts to phase out in 2023 and ends after 2026. After that, the depreciation schedule reverts to seven years.

Very few horses race more than three years, Barr said. The 2017 law provision has been great for the horse racing industry, he added, noting sales of 1-year-olds at Keeneland, a racetrack and horse auction complex in Lexington, Kentucky, are up in both number and dollar value. But industry accountants have told him that being able to pick between one- and three-year expensing would be helpful for the industry.

“The three-year depreciation schedule is not just a parochial play by me or Sen. McConnell, it is sound tax policy,” Barr said.

A senior Senate GOP aide made clear that when it comes to the thoroughbred racing and distilled spirits issue, the House bill does not reflect the Senate position and that McConnell expects further discussions about these provisions.

Rep. Dan Kildee, a Michigan Democrat on Ways and Means, said Neal’s year-end legislative strategy is based on that old maxim voiced by another Massachusetts political leader, former Democratic Speaker Thomas P. “Tip” O’Neill: “All politics is local.”

“We’re not going to negotiate with and for Mitch McConnell at the same time,” Kildee said. “If he wants something that’s important to him, he’s going to have to work with us.”

Ellyn Ferguson and Niels Lesniewski contributed to this report.

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