Conservative Groups Seen as Crucial Allies on Tax Reform

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By Kaustuv Basu

Conservative groups are spreading the message about the need for tax reform to their largely Republican base with targeted advertising and events around the country.

In the aftermath of their failed attempt to repeal the Affordable Care Act, Republicans in Congress and outside see these efforts as necessary to build a base of support for a rewrite of the tax code. The groups, such as Americans for Prosperity backed by billionaire brothers Charles and David Koch, and American Action Network, another conservative group, have the financial muscle and voter connections that could bolster support and deliver a crucial legislative victory for Republicans in 2017.

These efforts come even as House Republican leaders like Speaker Paul D. Ryan (Wis.) and Ways and Means Committee Chairman Kevin Brady (Texas) have taken to the road themselves this month to tout the benefits of a rewritten tax code. With a controversial border adjustment tax out of the way, there is more alignment on the broad elements of a tax overhaul than ever before and a motivation to push for success on a tax bill.

Brady is scheduled to appear with Grover Norquist, who leads Americans for Tax Reform, to talk about tax reform at a Sept. 1 event at Rice University in Houston. “It’s more important than ever now that taxpayer advocates, such as Americans for Tax Reform, lead on pro-growth tax reform,” Brady said in a statement. “We need their principled, conservative voices in this historic debate.” Brady’s statement echoed a sentiment voiced at an Americans for Prosperity and Freedom Partners event in Washington in late July where Trump administration officials said that the two groups could help sell the idea of a tax bill with lower rates.

Multimillion-dollar efforts that include advertising campaigns and local events to promote tax reform have been announced by the American Action Network and the Business Roundtable, an association representing CEOs of top American companies. The August recess and the month of September are seen as crucial times to ramp up the messaging on the need for tax cuts and simplification to the tax code before Congress gets down to the task of writing a tax bill. More details about the bill could come as early as September.

Tax Messaging

Americans for Tax Reform and other groups are crucial for building excitement and communicating the need for a rewrite of the tax code, said Ryan Ellis, a conservative who writes about tax reform for Forbes and is a tax adviser to the Family Business Coalition.

“In politics, surrogates are huge. We didn’t have enough good surrogates on health care,” Ellis said. It’s important to have people other than congressional lawmakers talking about the benefits of tax reform, he said.

Rohit Kumar, a former top aide to Senate Majority Leader Mitch McConnell (R-Ky.), said the groups provide support to lawmakers “in an effort they are already inclined to undertake.”

Two recent polls illustrate why these efforts are necessary.

A Bloomberg survey in July found that about 4 percent of those polled think that taxes are the most important issue facing the U.S. About 35 percent said health care is the top issue. Taxes ranked lower than jobs, terrorism, immigration, and climate change.

A Gallup poll in April found that 51 percent of those polled said their taxes are too high. That number was at 63 percent in June 1985, a year before the tax code rewrite in 1986. Gallup polling found that 62 percent of Republicans think their taxes are too high.

Voters need to be educated about tax reform because it isn’t something they necessarily talk about, Ellis said. That education could involve explaining why an expansion of the standard deduction could be useful, because taxpayers wouldn’t have to worry about getting all their deductions together, he said. The Trump administration has proposed doubling the standard deduction.

“You can go back to 2001, there was a group that called themselves the Tax Relief Coalition. It was a coalition of outside groups that were supporting the enactment of the Bush tax cuts in 2001,” said Kumar, tax policy services leader at PricewaterhouseCoopers LLP. The 2001 tax cuts under President George W. Bush lowered tax rates for individuals and households.

Chris Tausanovitch, assistant professor of political science at the University of California, Los Angeles, said besides financial backing, these groups provide a network of activists. These include “networks of other interest groups, of donors, of politicians, and so forth that they can have these discussions with,” he said.

Shaping the Narrative

The Koch brothers’ Americans for Prosperity is organizing more than 60 tax reform events during August and September in 36 states, including town halls and events in their district offices. So far, the group has spent over $2 million in tax reform advertising and promotion in 2017 and that figure is expected to go up substantially during the rest of the year.

The Koch network is advocating simplicity with no new taxpayer burdens, and supports the initial Trump administration proposal of a 15 percent business tax rate. A Koch strategy memo from earlier this year laid out its plan to influence tax reform, with the month of August focused on “outreach at home.” The next phase in the fall of 2017 includes reaching out to Congress and the Trump administration, visits by “grassroots leaders” to Washington to meet with lawmakers and their staffs, and ramping up a paid media campaign for “Shaping and Driving the Narrative Inside the Beltway.”

The AFP and Freedom Partners, another Koch backed organization, along with some retail groups, campaigned relentlessly this year against a controversial border adjustment tax proposal backed by Ryan and Brady that would tax imports at 20 percent. In July, Republican leadership gave up on the BAT.

The Koch network also plans to pressure some Democratic senators in red states who are up for reelection in 2018 to support tax reform legislation. Targets include Sens. Heidi Heitkamp (D-N.D.), Joe Donnelly (D-Ind.), Jon Tester (D-Mont.), and Joe Manchin III (D-W.Va.). “For those that don’t, we will absolutely be making that an issue in their state as people consider who their senator should be,” said Levi Russell, director of public affairs for the Americans for Prosperity.

The American Action Network, seen as a center-right group, is part of the tax bandwagon, with a $5 million campaign to boost tax reform. The group says on its website that it’s campaigning for “middle-class tax cuts and eliminating special interest loopholes.” Its campaign includes television, radio, and digital ads as well as direct mailers. A radio campaign this month is airing in 34 congressional districts.

Real Reform?

Tausanovitch, who previously worked with the Senate Finance Committee as a fellow, said his hunch was that these groups would end up supporting a “narrower reform that is more focused on lowering the rates.”

Although these groups can work with legislators on a shared vision of tax reform, there is a tension when it comes to what real tax reform looks like. “My guess is that these groups care much more about lower tax rates than they care about simplification,” Tausanovitch said. A more comprehensive reform bill can give rise to political problems, he said.

The BAT, which was a big simplification and reform idea, was axed with the help of some of these activist groups, Tausanovitch pointed out.

The idea of full and immediate expensing, which is part of the House GOP blueprint, hasn’t been embraced by the Koch network. Russell, the AFP director of public affairs, said that full expensing may encourage capital investment but a “higher value outcome would be a lower rate for more people.” Since the end of July, Brady has used the term “unprecedented expensing” to describe the plan, meaning that full expensing might no longer be on the table.

“Everybody supports broad comprehensive reform in theory, but none of the legislators support it in practice when they learn that the benefits of comprehensive tax reform are broad and the costs are highly distributed to interest groups that don’t want to pay those costs,” Tausanovitch said.

To contact the reporter on this story: Kaustuv Basu in Washington at kbasu@bna.com

To contact the editor responsible for this story: Meg Shreve at mshreve@bna.com

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