On The Money feed
November 08, 2013, 03:30 pm
‘Here we go again,’ says K Street as Democrats renew push for tax hikes
By Erik Wasson and Peter Schroeder
Lobbyists are crying “here we go again” as Democrats on the new budget conference committee renew their push for tax increases.
A Democratic wish list obtained by The Hill contains 12 examples of the types of “tax loopholes” that they would like to see closed in a year-end budget deal. Most have been proposed many times before.
Combined, the items on the list would raise $264 billion in revenue over 10 years, more than enough to switch off two years' worth of the automatic budget cuts known as sequestration.
Democrats say they won’t consider cutting entitlements in a deal unless Republicans end “egregious” tax loopholes for the rich and large corporations.
Owners of corporate jets, vacation homes and yachts would take a hit if Democrats got their way. Hedge fund managers and heirs would pay a higher tax rate, while businesses with overseas operations would see deductions eliminated.
Having defended the tax breaks through several fiscal fights in recent years, lobbyists say they have they are confident in their ability to play defense.
That said, many are irritated at having to fight the same battles again.
J.P. Delmore, a tax lobbyist with the National Association of Home Builders, said he’s exasperated that the mortgage interest tax deduction for second homes is on the chopping block again.
“It’s clear that there is still some education that we have to do,” he said. “There’s a misperception that the users are these extremely wealthy individuals.”
Delmore said he wasn’t shocked to hear that Democrats were trotting it out again.
“Unfortunately I’m not surprised. It’s a great talking point. It fits into the messaging they are trying to have,” he said.
Delmore said the NAHB sought out every member of Congress in the last year to lay the groundwork for protecting the mortgage deduction.
The homebuilders say the average household income of second-home mortgage holders is a modest $71,000, and that half of the savings from eliminating it comes from pinching families moving to a new home, because they technically have two mortgages in a single tax year.
“I never have that pit in my stomach completely go away, but we have done a pretty solid job explaining the impact on middle-class homeowners and folks in transition,” Delmore said.
Dan Hubbard of the National Business Aviation Association said he is “mystified” that the accelerated depreciation rate for business jets keeps coming up at the top of the list, because the industry supports 1.2 million jobs.
“The manufacture and use of these airplanes is an important ingredient in economic recovery,” he said. He said studies show $15 billion in economic output related to corporate jet use and manufacture, and says the industry is boosted by its tax break.
“If somebody is going to buy and fly it, somebody is going to weld it,” he said.
The jet industry has manufacturing facilities in Kansas, Georgia and Ohio as well as the home states of the Budget Committee heads Rep. Paul Ryan (R-Wis.) and Sen. Patty Murray (D-Wash.).
"Some manufacturers rely heavily on this accelerated depreciation schedule in their business model. Without it there will be many more lay-offs in the corporate and business jet industry" said Jim Richmond, the CEO of Washington State-based plane maker Cub Crafters.
Wall Street is also in the crosshairs of Democrats.
One of their wish list items would limit the deductions executives can take for stock options. Another would force financial derivatives to be taxed on a “mark to market” basis, forcing holders of those financial instruments to estimate their market value each year and pay any appropriate taxes on gains.
Another target is the “carried interest” provision that allows private equity and hedge fund executives to have their income taxed at the lower capital gains rate.
The private equity industry, which Democrats skewered during Mitt Romney’s presidential run, has been mounting its own attempt to school Congress on the impact of ending the tax breaks.
“Increasing taxes on carried interest would negatively impact capital investment, including private equity, real estate and venture capital,” said Noah Theran, spokesman for the Private Equity Growth Capital Council.
“Our goal is to ensure that policies affecting our industry are based on facts and an understanding of the benefits of private equity and growth capital investment,” Theran said.
A Democratic aide said the wish list is not an exhaustive set of proposals, but rather a set of examples of the types of tax breaks the party might want to see dealt with in a budget deal forged by the committee’s Dec. 13 deadline.
— This story was updated at 5:38 p.m.http://thehill.com/blogs/on-the-money/budget/189741-dems-eye-tax-hikes-%E2%80%98here-we-go-again%E2%80%99