Republicans are barreling into a lobbying frenzy next week, whenHouse Ways and Means Chairman Kevin Brady plans to unveil asweeping tax bill to remake the U.S. economy that's being craftedwith rigorous secrecy.

The stage was set with the House's adoption Thursday of a budgetresolution designed to speed the course of tax legislation and kickoff a three-week sprint toward a House bill. Now, lobbyistsrepresenting every corner of the economy are poised to firstdevour, then attack what may be hundreds of pages of legislationthat Brady says he'll release Nov. 1.

Special interests from realtors to dairy farmers will be tryingto save their industry-specific tax breaks, said Tim Phillips,president of Americans for Prosperity. His group, which is backedby billionaire industrialists Charles and David Koch, supportsending such breaks.

“It's pretty fierce,” Phillips said. “We met with Brady onTuesday and he was saying their offices are swamped with all thespecial interest groups swarming in asking to be protected.”

President Donald Trump has promised that middle-class Americanswill be the biggest beneficiaries of the tax overhaul. But itremains to be seen which groups will lose their advantages—anecessary step to help pay for cutting tax rates. Even Republicanmembers of Brady's committee say they don't know whether anydecisions have been made.

“The problem is that Ways and Means has somewhat been kept outof the loop with details,” Rep. Jim Renacci of Ohio, a member ofthe House tax-writing panel, said in an interview. “There are stilla lot of hurdles to get it done.”

The bill is supposed to be released in just five days.

'80%-Plus'

Leaving such details under wraps has become “almost adouble-edged sword,” said lobbyist Will Hollier, whose clientsinclude Microsoft and Visa. The secrecy has allowed for someefficiency, but it's also prevented GOP leaders from winning broadsupport for the legislation in their own conference so far, hesaid.

A key test will be how House leaders deal with the stateand local tax deduction, the first flash point in the debate. Trumpand congressional leaders have proposed abolishing that break,which benefits high-tax states that tend to vote Democratic. Butseveral Republican House members from such states want to preservethe break in some form.

“Can you get people to put their party loyalty above home-grownconstituents' concerns?” said Hollier, a former chief of staff andlegislative director for Sen. Mike Crapo, an Idaho Republican. “Howthey deal with that will show that people can be broken.”

A spokeswoman for the Ways and Means Committee declined tocomment.

Some conservatives wonder if the secrecy does more harm thangood. “I think it's important that members feel like they haveownership of big, majority-defining packages like this,” said RyanEllis, a tax lobbyist who formerly worked with anti-tax activistGrover Norquist. “They really didn't on health care.”

The tax framework that the White House and GOP leaders releasedon Sept. 27 calls for tax rate cuts for individuals andcorporations, and is estimated to raise the deficit by $2.4trillion. Republicans need to get that number down to $1.5 trillionunder their budget parameters—a difficult balancing act as they'vepromised a more generous Child Tax Credit and bigger tax breaks formiddle-income families.

“I don't think that people realize that 80%-plus of this effortis eliminating things in the code,” said Sen. Bob Corker ofTennessee, who has called for a tax bill that won't add to thefederal deficit after taking into account reasonable economicgrowth expectations.

“I mean, over the next two weeks, especially when the Senatetax-writing committee puts their stuff out, they're going torealize that this the biggest tax code rewrite since 1986 and it'sgoing to affect everyone,” he said.

'Totally Undecided'

One of the ways to make up the revenue gap is by limiting thedeductions corporations take on the interest they pay on theirloans—a major consideration for industries such as private equityand real estate. A prior House Republican proposal called forcompletely eliminating the corporate break, which could have raisedmore than $1 trillion over a decade.

“They're totally undecided,” about how to restrict corporateinterest deductions, said Marc Gerson, the chair of law firm Miller& Chevalier. Gerson said proposals include setting limits basedon a company's earnings before interest, tax, depreciation andamortization, or Ebitda, a key measure of profitability. Existingdebt might be grandfathered in, he said.

Another piece of the framework is aimed at preventing U.S.companies from shifting their earnings to offshore taxhavens—by imposing a minimum foreign tax. The idea—describedbriefly and obliquely in the framework language—was called“appalling” several weeks ago by Ken Kies, a lobbyist whose clientsinclude Microsoft and General Electric. The rate and formula forsuch a tax haven't been specified, but the proposal carriesmultibillion-dollar implications for multinationals.

On the individual side, the treatment of state and localdeductions remains in question. At least 12 Republicans fromhigh-tax states, whose constituents stand to lose if the tax breakis repealed, voted no on the House budget Thursday. The most vocalamong them have demanded a compromise on the issue.

Brady said Thursday he hadn't made a decision on what to doabout SALT after meeting with Republicans who are worried thatending the tax break would slam middle-class families in theirstates—although he said he's confident he can accommodate theirconcerns.

'Minority Express Lane'

“The bottom line is the ball is in their court, and they knowit,” said Rep. John Katko, a New York Republican who's a top targetof Democrats in the 2018 election. “They didn't get specific inthis” meeting, he said, but gave “a lot of assurances.”

Democrats, meanwhile, are also waiting to pounce. Brady has sofar resisted pressure to embrace Trump's call for making no changesto the tax-protected status of 401(k) retirement plans. FiveDemocratic senators—Debbie Stabenow of Michigan; Sherrod Brown ofOhio; Ron Wyden of Oregon; Ben Cardin of Maryland; and Bob Casey ofPennsylvania—on Thursday signed a letter warning Republicansagainst “reducing the opportunities that millions of Americans haveto save for their retirement.”

The tax battles will take place amid a mad dash to complete atax overhaul by the end of the year. House and Senate leaders hopeto pass bills through their chambers by Thanksgiving, said SpeakerPaul Ryan and Senate Majority Whip John Cornyn. The different billswould then have to be reconciled.

In 1986—the last time the U.S. tax code was revamped—it tookabout 10 months from when a tax bill was introduced until it wassigned by President Ronald Reagan.

There are, of course, other issues on the congressional agenda.Congress must fund the government to avoid a shutdown by Dec. 8.That could turn ugly as the White House has signaled it'll demandfunding for a border wall, and Democrats say they want a solutionto protect young undocumented immigrants. Congress also facesimpending business to shore up health-care markets, extend floodinsurance and revisit the Iran nuclear deal—all of which could soakup valuable time.

Nonetheless, there may be some common ground among members ofCongress—a shared interest that could surpass the specialinterests.

The Republican determination to complete a tax overhaul by theend of the year is driven in part by “the very real and justifiedfear that the majorities hang in the balance and that failure ontax puts you in the express lane to the minority,” said RohitKumar, a former deputy chief of staff to Senate Majority LeaderMitch McConnell who now oversees tax policy forPricewaterhouseCoopers.

From: Bloomberg News

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