Tax reform tops agenda — and helps explain campaign spending explosion

November 1, 2012

It is no accident that much of the record spending in this year’s election, now funding an avalanche of last-minute ads across the country, comes from groups with a strong interest in shaping federal tax rules.

Tax reform is likely to be at the top of the agenda for the next Congress. And the topic ranks as the No. 1 concern of the business groups that have dominated independent spending in this election.

“Fear of Obama tax hikes is driving things,” said Grover Norquist, whose Americans for Tax Reform organization will spend a record $24 million on the 2012 race.

Tax issues are a longtime and potent motivator for business participation in politics. But the interest has been magnified many times over this election year, with the nation’s debt and looming automatic tax increases and spending cuts creating strong demand for a comprehensive overhaul of spending and tax rules.

Tax policy is a leading issue for Crossroads GPS and its sister organization, American Crossroads, founded in part by GOP strategist Karl Rove, which will spend $300 million this election cycle.

It tops the list for the corporate chief executives participating in the Business Industry Political Action Committee, which has a quiet but powerful influence on congressional elections. “It is life or death,” said Bernadette Budde, BIPAC’s political director.

Groups on the left are also spending heavily, often citing fairness in tax policy — a reference to President Obama’s effort to raise taxes on the wealthy.

Getting the top 1 percent of earners to pay a larger share is one theme in the $100 million in election spending by the government workers union AFSCME.

Tax and fiscal concerns rank high at the U.S. Chamber of Commerce, which has new television ads this week for Senate races in Wisconsin and Virginia, among 14 Senate and 40 House races in which it has been a leading investor.

In Florida, the Chamber of Commerce and Crossroads have spent $7.8 million in an effort to defeat Sen. Bill Nelson (D), a member of the Finance Committee, who wants to close tax breaks for oil companies and the wealthiest Americans.

FreedomWorks, whose motto is “Lower Taxes. Less Government. More Freedom,” has spent $2.6 million backing Nelson’s opponent, Rep. Connie Mack (R), who signed Norquist’s pledge never to support a tax increase.

In the past two weeks, a new organization called Freedom PAC has spent $2.5 million backing Mack, according to the Center for Responsive Politics. Sheldon Adelson, the Las Vegas billionaire, has donated $2 million to Freedom PAC, which lists electing Mack as its top priority. Hedge fund executive Robert Mercer donated $250,000 to the cause,

Mercer’s company, Renaissance Technologies, has lobbied in the past on tax issues facing his industry. In 2010, he helped form Concerned Taxpayers of America to defeat Rep. Peter DeFazio, an Oregon Democrat, who proposed legislation to levy a tax on certain hedge fund transactions.

The potential impact of the election on tax policy came up earlier this year when Steven Law, who heads American Crossroads and Crossroads GPS, told a meeting of Washington lobbyists and trade association officials that their interests on such issues as labor law, taxes and fiscal policy — on which they have spent huge amounts of time and money — could be advanced or harmed based on how the issues play in one campaign.

“We have made clear that Crossroads will be engaged in the tax reform fight, educating constituents about the issue and where their elected representatives stand on the topic,” said Jonathan Collegio, the group’s spokesman.

In Michigan, a newly formed group called Hardworking Americans has launched a $1 million ad buy against Sen. Debbie Stabenow, accusing the Democratic incumbent of raising taxes multiple times. The Michigan-based group was formed so late that it will not have to release names of its donors until after the election.

The spending underscores the belief that the biggest influence of super PACs, which proliferated after the Supreme Court’s 2010 Citizens United decision lifting restrictions on corporate political spending, may be in congressional campaigns. In many cases — including in Florida and Michigan — the groups are being created to back just one or two candidates.

Nebraska Democrat Bob Kerrey, who is running to reclaim his old Senate seat, is calling attention to money flowing into his race, saying he is concerned about the impact of last-minute spending by a conservative billionaire, Joe Ricketts, and his GOP allies.

A poll this week by the Omaha World Herald showed that race had tightened considerably, with Kerrey three percentage points behind opponent Deb Fischer, the state legislator who a few weeks ago held a double-digit lead.

A Ricketts-funded super PAC, Ending Spending Action Fund, has launched $434,000 in TV spots against Kerrey. Crossroads GPS announced this week an additional $420,000 ad buy against Kerrey, who advocates increasing taxes on the very wealthy as part of broader fiscal reform.

The ad lambastes “liberal” Kerrey for supporting an energy tax and hits him for living in Greenwich Village for the past decade while he served as president of the New School.Despite the funds flowing in the effort to defeat Kerrey, the biggest outside spender so far is a ­super PAC backing him, End the Gridlock, which has spent more than $1.5 million. The group is funded by a handful of Los Angeles, New York and Omaha entrepreneurs and a $267,000 gift from a super PAC set up by former aides to Senate Majority Leader Harry M. Reid (D-Nev.).

Rickett’s high-dollar support for Fischer prompted Kerrey to write a widely distributed letter last week asking Ricketts to explain why he had spent so much.

“You may be motivated by a desire to keep your personal income taxes from rising,” Kerrey wrote. “I suspect you were angry about my vote in 1990 to support . . . an increase in the top rate” for taxpayers. He also noted that Fischer had supported legislation that cut taxes on Ricketts’s former company and others in the state.

Ricketts did not respond to requests for comment, but Brian Baker, who runs the super PAC that Ricketts created, said tax concerns are not a motivation. The organization is focused on fiscal and spending issues but is also trying to correct what Baker calls “Professor Kerrey’s characterizations of Fischer’s record.” Ending Spending has received most of its contributions from Ricketts, but it also took in $1 million from Adelson.

Ending Spending, which includes both a super PAC and a nonprofit organization, is expected to spend $15 million this election cycle — much of it in the campaign’s final weeks.

Dan Eggen and T. W. Farnam contributed to this report.

Tom Hamburger covers the intersection of money and politics for The Washington Post.
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