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America October 2, 2017 3 mins read

Tax Reform: Lobbyists Race to Washington

America ı By Bryan Andover

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K street, lobbyists for tax reform

Last week marked the unveiling of Trump’s corporate-friendly tax reform package. Among many proposed changes is a slashing of the corporate tax rate from 35% to 20%. Since its release, industry groups from across the economy have been scrambling to make their stakes in the reform heard by Washington.

K Street Lobbyists Will See Big Business

The subsequent debate that will unfold between industry lobbyists and Congress will be nothing short of fireworks. Trade groups will fight to maintain their advantageous tax positions against others who are competing for their own loopholes in any legislation. Chris Krueger of the Cowen Washington Research Group, likened the approaching battle to the “corporate hunger games.” "Only one-sixth of lobbyists were involved with health care (give or take — assuming it is one-sixth of economy). Six-sixths of lobbyists are involved in taxes."

As the NY Times reports, a short clause in Trump’s plan alludes to some of the biggest potential changes. Page eight ambiguously refers to plans to get rid of “numerous” deductions and to “modernize” tax rules impacting specific industries. Existing deductions for solar panels and mortgage interest, for example, provide huge tax incentives for the customers of those industries. Any proposed changes to these, as the plan suggests, would certainly spark a mad dash by lobbyists representing these businesses.

Although the plan is short on nitty-gritty details, it does offer a broader picture of structural changes. On the household side, there would be three tax brackets, 12%, 25% and 35%, the highest (the current highest is 39.6%). It also proposed eliminating the estate tax completely.

On the corporate side of things, the rate would be lowered to 20% from 35%, for businesses. There would also be a one-time repatriation tax of about 10% to incentivize firms to bring overseas cash holdings back home.

Silicon Valley Wants it all From Tax Reform

Apple CEO Tim Cook (R) and Paypal CEO Peter Thiel (C) listen as President Trump addresses business leaders.

Tech companies have some of the biggest stakes in tax reform. According to the Center for Responsive Politics, the industry has hired more than 500 lobbyists in 2017. This is more than any year since 2010. A low corporate tax rate is desirable, but the previously mentioned repatriation tax will be chief among the concerns of the tech industry.

Companies like Apple, Microsoft, Oracle, and Google parent Alphabet all have vast fortunes sitting in foreign bank accounts, not taxable by the United States. Apple itself has an eye-whopping $246 billion in overseas accounts. That’s more cash than the U.S. Treasury generally has on hand at any given time.

You may hear in the news that Silicon Valley detests the current administration. That will only go so far. Tech giants will need to work with the White House and Congress over the fate of their money.

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