Tax lobbyists -- waiting for next year
Tax reform is almost a fait accompli. Stunned and exhausted lobbyists have given up any hope of changing the bill, which cuts out billions of dollars in tax breaks for their business clients, before it reaches the House and Senate floor this fall.
How long the new tax code can remain in its pristine form, however, is another matter.
``It's like one of those `magic slates' you played with when you were a kid,'' says Richard Trachtman of the American Society of Internal Medicine. ``You write on it, lift up the plastic to erase the slate, and then you can write on it again.''
Even those on Capitol Hill concede that there will likely be technical adjustments next year as the law begins to affect the economy. Indeed, there have been four tax bills in the last six years, and no one expects this bill to be the last.
``I suspect that early in the next Congress, in January and February, we'll see hundreds of bills introduced to change this bill,'' says Wayne Thevenot, president of the National Realty Committee, which represents large real estate developers like Trammell Crow Corporation.
One candidate for restoration is the investment tax credit, which helps heavy manufacturing and capital- intensive companies. This is the third time the ITC has been put into place and repealed. Since the credit benefits industries, such as steel and autos, that are struggling with foreign competition, tax- watchers say it could find its way back into the tax code.
Others, including Mark Starcher, who is counsel with the research and publishing firm Tax Analysts, think that commercial real estate will get some preferences restored. The real estate industry stands to lose up to $60 billion in tax breaks over the next five years.
Many economists are concerned that tax reform could damage long-term economic growth. By shifting $120 billion of taxes from individuals to business, the bill encourages spending, often on imports, rather than investment in plants and equipment that can keep the country competitive. Limiting real estate tax breaks ``is fine in theory, but in practice [Congress] may find the need for refinement if they discover it's not going to work,'' says Mr. Starcher.
``If we go into recession in late 1987 or early 1988, we'll see massive damage control,'' says Gordon Richards, an economist at the National Association of Manufacturers (NAM).
Predicting which breaks, and how many of them, will be reinstated is impossible until it becomes clear which industries are hardest hit. Moreover, the political and economic climate has changed. ``The backslapping, good-old-boy, you-owe-me-one approach is a thing of the past,'' says Starcher.
Lobbyists know that it would be difficult for any legislator to come down on the side of special-interest groups, especially in an election year. During the tax battle, particularly when the Senate Finance Committee nearly strangled reform with loopholes last spring, lobbyists were portrayed as well-paid adversaries of the middle class.
Now lobbyists are keeping an uncharacteristically low profile. Even though they have several weeks to try to persuade Congress to alter or kill the bill, most are not trying. ``We're all resigned to it,'' says Sarah Ross of theNAM. Her words are echoed by others representing industries that lose under tax reform, including banks and defense contractors.
That doesn't mean that the nearly 1,100 tax lobbyists in this city have thrown in the towel permanently. They appear to be tailoring their approach to fit the realities of the Gramm-Rudman deficit reduction law.
``They will have to show more deference to the deficit and to the fact that they're putting the legislator in a sensitive position'' by asking for a special break, says Starcher.
Given Congress's ``bottom-line approach to taxes,'' he says, lobbyists will have to persuade legislators with economic arguments, not personal relationships. They need statistics, like the number of jobs saved or lost in a congressman's district, the local tax revenues gained or lost, even the effect on social services like schools or hospitals. Only armed with such ammunition will legislators be willing to step up to bat, says Starcher.
The point is not lost on the National Realty Committee. ``We will monitor the effect of this bill very carefully,'' says Mr. Thevenot. ``We're going to do some economic analyses and some statistical collecting as to exactly what the impact's been. And I can assure you, where it's appropriate, we'll ascribe [damage to the economy] to the tax bill.''
Despite the setback, Thevenot has kept his sense of humor. ``I'm glad I'm not being paid for what I produced this year,'' he jokes, a bit grimly.