Just because the sequestration dance I discussed last time is now in full swing, it doesn’t mean Congressional Republicans are through developing new dance steps.
Indeed, that two-step is nothing compared to watching them dance to the tune of powerful Washington lobbyists. While the sequestration spending cuts and looming battles over increases in the federal debt ceiling and the 2013 federal budget are grabbing all of the headlines, the lobbyists for special interest groups are marshalling their troops for a long-anticipated battle over the US tax code.
The reason you and the American people don’t hear very much about this is precisely because powerful corporate special interests don’t want you to hear about the billions of dollars they reap from special tax breaks and loopholes. As far as the lobbyists are concerned, when it comes to the American public’s right to know about these corporate welfare payments, ignorance is bliss. It’s also a reflection of the power these lobbyists wield.
Once a generation, America makes major changes in its federal tax laws. The reason why we have to do this is because every year legislators in Washington DC insert tax breaks or create new loopholes that benefit certain special interest groups. Over time these corporate welfare payments, which total in the billions of dollars annually, result in a significant loss of tax revenues. Since the last major overhaul of the tax code occurred in 1986, hundreds of new tax breaks and loopholes have been created that Congress must now clean up.
Congressional Democrats like to call this process tax ‘reform’ because they view it as a way to raise new revenues without hiking tax rates for all Americans. On the other hand, Republicans in Congress prefer to use the terms tax ‘simplification’ or ‘streamlining’ because they want to help American business interests become more competitive. Of course, since Republicans were also responsible for creating most of the tax breaks and loopholes in the first place, this periodic ‘streamlining’ creates new opportunities to insert new types of tax breaks for special interests.
Mind you, while most of the tax breaks and loopholes in the current tax code benefit major corporations and business industry associations, a number of charitable interests and other non-business interest groups are also beneficiaries, so any plans that legislators in Washington may have to limit or eliminate existing tax deductions are bound to stir up a hornet’s nest of protest. But no matter how long or hard those affected by the coming tax law changes may object, the political will to legislate finally exists on both sides of the aisle in Congress.
On the Democratic side, President Obama knows that Republicans in Congress will never agree to a hike in tax rates, so any future tax revenue increases will have to come via changes in the tax code. Congressional Republicans are also under pressure from some of their constituents to eliminate tax loopholes, like those that allow companies to defer US taxes on profits earned from foreign subsidiaries or ones that only benefit certain American industries. Rewriting the tax laws allows President Obama to garner additional tax revenues while also allowing Republicans to tell their constituents they made their taxes fairer but not higher.
While I’m sure that the end result of the coming US tax code overhaul will be more tax revenues for the federal government, I’m not so sure it will also mean the tax code will be much less generous to the special interest groups now lobbying members of Congress from both political parties. The reason why lobbyists earn millions of dollars every year peddling tax breaks to legislators on behalf of their corporate clients is because they usually succeed in getting the law changed to their liking. I hope I’m wrong, but I have seen little evidence that would lead me to believe that lobbyists in Washington will be any less successful this year.
Charles Laffiteau is a US Republican from Dallas, Texas who is pursuing a PhD in Public Policy and Political Economy. He previously lectured on Contemporary US Business & Society at DCU from 2009-2011.
