House Republican ‘Tax Teams’ In Spotlight As Major Provisions Are Set to Expire

Rep. Brian Fitzpatrick, R-Pa., who is leading the Working Families team charged with reviewing expiring individual tax provisions, said the teams’ goal is to gather stakeholder and constituent feedback ahead of next year’s expirations.

“We’re starting with a clean slate. We have no preconceived notions,” he said. “We want the best, fairest code that will allow for the most robust growth for our country.”

K Street is following tax team developments as lobbyists seek to engage members and staff—and divine their intentions. The teams are accepting public comment through Oct. 15.

“You can’t ignore them,” said Mary Burke, who leads the tax policy practice at K&L Gates LLP, a law firm. “If the chairman of the Ways and Means Committee has formed these tax teams, then you take those seriously and you use them as an opportunity to voice, to provide your input.”

Lobbyists are working to puzzle out the jurisdiction of each team, whose broad titles have left some uncertain of which are in charge of various parts of the tax code. Meanwhile, the lack of Democratic input is a concern for others, particularly if Washington ends up with divided government again after the November elections.

Senate Finance ranking member Michael D. Crapo, R-Idaho, has said he’s eyeing a similar educational effort for Republicans on his committee. But top Democrats on the tax-writing panels in both chambers have indicated little interest in setting up competing working groups on their side of the aisle, arguing there are already existing venues for digging into the issues.

“I think the subcommittee system works fine,” Ways and Means ranking member Richard E. Neal, D-Mass., said. “I don’t think that subtracting from that or moving away from that is a good idea. The subcommittees provide a lot of intellectual heft.”

Unclear jurisdiction

The announcement of the tax teams has prompted comparison to the working groups set up by former Rep. Dave Camp, the Michigan Republican who chaired Ways and Means from 2011 to 2015. Camp ultimately unveiled a 2014 tax overhaul draft that didn’t go anywhere at the time but wrapped in ideas from both sides of the aisle and underpinned development of the eventual 2017 package.

The Camp working groups were assigned traditional topics, such as energy, pensions and retirement, international, and smaller “pass-through” business structures. In contrast, Smith’s teams have broad, conceptual titles, such as “U.S. Innovation,” “American Manufacturing,” and “New Economy,” which has prompted some confusion on K Street.

“We do have these 10 very broadly titled tax teams that aren’t tied to particular sections of the code,” said Marc Gerson of Miller & Chevalier, another law firm with a large tax practice. “So far, I think we’re still reading the tea leaves.”

Some of the teams seem to have overlapping jurisdiction, which could make things “a little challenging,” said Gerson, who previously was GOP tax counsel on the Ways and Means Committee.

David Skillman, a managing director at Arnold & Porter, agreed, adding lobbyists were figuring out which teams’ clients would need to engage with to ensure their interests are heard.

“The structure of the working groups is a little vague,” he said. “They haven’t formally delineated all of the differences, and so some of the topics are little self-selected by the members outside of the broad identifiers the committee gave.”

‘Missed opportunity’

Another key difference between earlier working groups and the Ways and Means tax teams is previous iterations were bipartisan. Former members and staff who participated in the Camp working groups said they found them to be a valuable educational experience that sometimes yielded bipartisan outcomes.

“It’s just another opportunity for members to get together, get in the same room, get to know each other, build up that elusive trust, which is lacking these days on Capitol Hill,” said Ron Kind, a former Democratic House lawmaker from Wisconsin. “So we’ll see how this new approach goes.”

Kind, who left Capitol Hill in 2023 and is now senior counsel at Arnold & Porter, co-led the working group on pensions and retirement alongside former Rep. Pat Tiberi, a Republican from Ohio.

“A lot of the work we’ve been doing on retirement security in recent years really stemmed from the working groups back then, and getting ready for the tax overhaul back in 2017,” he said, including bipartisan laws making changes to the retirement system in 2019 and again in 2022.

Aruna Kalyanam, who spent two decades working for Ways and Means Committee Democrats, said the working groups facilitated open conversation among members on opposite sides of the aisle. Kalyanam, who left the Hill in 2021, is now a principal at EY’s sustainability tax practice.

The decision to take a single-party approach to the tax teams is likely to bear the greatest consequences if Washington remains under split party control next year, she said.

“In those rooms where members can talk freely, it’s astonishing how much more you can find in common,” Kalyanam said. “In divided government, it’s going to be critical to find those areas that you have in common.”

Skillman, a former top aide to Ways and Means member Earl Blumenauer, D-Ore., spoke highly of the Camp working groups, saying they were a great learning opportunity for members and staff.

“The staff experience in the working groups was really interesting. They functioned as sort of off-the-record mini hearings on a topic. Our topics were reasonably tightly focused where we brought in witnesses on a bipartisan basis,” he said. “It was a chance to sit down with leading practitioners and professors in the space and find out where they thought the weak parts were.”

The Republican-only approach is “a missed opportunity to identify bipartisan overlaps,” Skillman said.

The tax teams also aren’t set up to have tough conversations about how to offset the cost of renewing the tax provisions, he added. Fully extending the expiring provisions would cost $4 trillion over the next decade, not counting debt service costs, according to the Joint Committee on Taxation.

“Always in tax conversations the hardest part is always lurking out of sight, which is how you pay for it,” Skillman said. “These working groups are good insofar as they help educate the members on topics, but they aren’t really designed to bring up the pay-for side of this question. And I think that’s the hardest part as we go into the next cycle.”

‘Partisan by nature’

Ray Beeman, principal and leader for Washington Council Ernst & Young, defended the GOP-only approach to the tax teams, saying the wide divide between Republicans and Democrats on the 2017 law would make bipartisan teams a difficult proposition.

“As much as I would like to see a bipartisan type of work stream, I don’t know if you can do that,” said Beeman, a former top GOP Ways and Means aide during Camp’s tenure. Republicans have said they want to make the 2017 law permanent, while Democrats have criticized it and want to increase taxes on the wealthy and corporations.

The end result in 2017 was partisan, but in the years leading up to the law’s passage there was bipartisan consensus that parts of the tax code needed to be fixed, Beeman said, citing the 35% corporate rate and the international tax system.

With the 2017 law as the starting point, there’s far less overlap between the two parties, Beeman said. Miller & Chevalier’s Gerson agreed.

“The 2017 Trump tax cuts are so controversial or partisan by nature that it seems to me that it’s understandable why this is being done on a Republican-only basis,” Gerson said.

Conversations about offsets will be important next year, especially in light of growing debt and deficits, but there’s a limit on how productive discussions will be before the election, he added.

“It’s really hard for either Republicans or Democrats to start trying to negotiate out or have bipartisan negotiations on offsets when they just don’t know kind of where the power is going to lie,” Gerson said.

_______

©2024 CQ-Roll Call Inc., All Rights Reserved. Visit cqrollcall.com. Distributed by Tribune Content Agency LLC.