A lot of politicians have climbed on the tax reform bandwagon. One idea gaining traction? Eliminate some tax loopholes for businesses. But that’s not going over well in corporate suites. Many companies are gearing up to defend their cherished tax breaks, even if they seem…a little loopy.
NASCAR track owners get to write down the value of their speedways in record time. Video game makers get research and development tax credits meant for new technologies. Even when they’re just making updated versions of existing games. And Starbucks? It gets a manufacturing tax credit for roasting coffee beans.
That may sound crazy, but Starbucks spokesman Zack Hutson says the company uses its tax savings to open new roasting facilities, creating jobs.
“The domestic production tax benefit is helping us invest in American manufacturing at a time when many U.S. companies are still sourcing products from abroad,” he says.
Lots of lobbyists use the jobs argument, button-holing members of Congress and saying, ‘Hey, the money from my tax break is used to create jobs — in your district.’
“Every tax break got into the tax code based on some justification,” says Lee Drutman, a senior fellow at the Sunlight Foundation, which tracks lobbying and fundraising. “But in totality, they add up to a whole stinking mess of craziness.”
Crazy mess or not, corporations have hired legions of lobbyists to defend their loopholes. Drutman estimates that companies and interest groups spent at least $619 million lobbying on tax issues over the past two years. And they aren’t just defending their tax breaks. Some want to create new ones.
The National Brewers Association is a trade group based in Boulder, Colo., of small, independent breweries. They want a lower excise tax rate on their beer. Bob Pease is chief operating officer. Once a month, he leaves his beloved Rocky Mountains for the Hill — Capitol Hill, that is — to lobby.
“Oh, it’s been a big part of my life for the past two and a half years,” he says.
But what’s he thinking? Trying to get a new break into the tax code now? Pease says he has no choice. He has to piggy back on tax reform, try to get his bill attached to it.
“Because our bill is so small, we’ve been told it will never get considered as a standalone bill,” he explains.
And Pease says big tax bills don’t come along very often. He’s right. The last time Congress passed major tax reform? 1986. Then as now, lobbyists were trying to build in new tax breaks, or protect old ones.
Ken Kies remembers. He’s a leading tax attorney and lobbyist in Washington. But back in ’86, he was the top Republican staffer on the House tax-writing committee. He recalls leaving one meeting at around four in the morning, chased by a determined lobbyist.
“I’m leaving the building and this guy is coming after me and asked me to stop,” he say, laughing. “And I thought, you have to be kidding me.”
Despite all the lobbying, Kies says tax reform succeeded in ’86 because both parties were determined to make it happen. He’s just not sure there’s the same determination this time around.