Jeffrey H. Birnbaum
Washington Post Staff Writer
Monday, July 24, 2006; 1:00 PM
K Street Confidential columnist Jeffrey Birnbaum was online to discuss the potential lobbying frenzy over tax reform. He also answered questions about the intersection of business, politics and government on Monday, July 24 at 1 p.m. ET .
Read today's column about the
A transcript follows.
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Jeffrey Birnbaum: Hello all,
Thanks for signing in.
My column today is about Sen. Ron Wyden's lonely crusade to overhaul the federal income tax. That ought to spark a lot of controversy!
Please send me some questions about that, or about any other juicy issue that interests you.
Okay, then, let's get started.
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Sanibel, Fla.: As the author of "Gucci Gulch," and one who tracked superstar lobbyists like Charlie Walker, Tommy Boggs, J.D. Williams and other tax lobbyists in their heyday, would you agree that today the big lobby names are the telecom guys and gals, with many buzzing around the FCC who aren't even required to be registered? That's where the biggest money is in the Internet era, isn't it?
Jeffrey Birnbaum: Well, Sanibel, as usual, you put your finger on it.
Telecom is one of the hottest topics on K Street, if not THE hottest topic. And the FCC lobbying is an area worth exploring, that's for sure.
I have come to learn more about appropriations lobbying (read:earmarks) lately, and I wonder if that isn't as sizzling a branch of lobbying as telecom.
Surely it would be a close contest.
Anyone out there have any interesting tips about lobbying at the FCC? Send them now or to my e-mail, kstreetconfidential@washpost.com
Thanks!
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Washington, D.C.: Doesn't Wyden have a big problem with is own party on this topic. At least in theory, Republicans should favor fewer loopholes (although in practice many plug for them). The Democrats, on the other hand, are quite up front, they want the government to encourage and discourage certain activities and the tax code is one vehicle. Tax reform the limits loopholes would take away this option.
Jeffrey Birnbaum: Tax reform of the kind Wyden wants (and which passed in 1986) would combine both GOP and Democratic ideas.
For the Democrats, loopholes would be closed (meaning primarily corporate tax breaks).
For Republicans, tax rates would be reduced.
That's the combination that former senator Bill Bradley (D-NJ) devised as the perfect political synthesis and which, with Ronald Reagan's backing, became law 20 years ago.
Wyden wants to persuade Congress to adopt an updated version of that compromise. His main problem, I think: business interests are so much more powerful now, the increases in corporate taxes his version of "reform" would require might never get through Congress these days.
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Irvine, Calif.: How would you revise the death tax, so that families can pass down their homes to their children without paying a tax bite for homes that are valued from $3 to $10 million. Would raise the exemption floor or revise it some other way? Or would tax the entire value?
Jeffrey Birnbaum: I don't think I want to step into that debate. I would say, however, that there is an active effort in Congress now to reduce the bite of the estate tax. It's possible that some version of repeal (or something close to it) will be added to a pension-revision bill moving through Capitol Hill in the next few weeks. Such an addition could sink the overall legislation, so I'm not betting at the moment that the estate tax provision will be added. But keep your eye on Congress; something could happen to make it cheaper to pass on your house (and other assets) to your heirs--permanently.
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San Ramon, Calif.: Does it matter that the White House seems interested in advocating for tax code reform? With Bush acting erratically (to be polite), his poll numbers in the toilet, and GOP lawmakers doing their best to distance themselves from him, how valuable is White House support these days?
Second, what does reform mean to Bush? You stated that "Wyden's Fair Flat Tax Act would lower taxes for millions of middle-income families, in part by raising taxes on some corporations and also on wealthy people with significant investment income -- which the president would likely oppose." Are there any documents intended for regular people that summarize Bush's plan?
Jeffrey Birnbaum: Bush doesn't have a tax reform plan yet. The notion that businesses and rich folks would have to pay a lot more in taxes, however, runs counter to everything that he has stood for so far.
And it does matter what the president wants or doesn't want. With an issue as controversial as tax reform, there would be no chance of passage without presidential backing. It's as simple as that.
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Holualoa, Hawaii: Any chance of getting Federal Tax breaks for those who use solar energy as with cars?
Jeffrey Birnbaum: Yes, I think there is. The higher the price of oil (and gasoline) the more interest there is in Washington to assist the use of alternative fuels. If I'm not mistaken (and I know someone out there will correct me if I'm wrong) there already are some tax incentives for solar power. Given President Bush's recent assertion that the U.S. is addicted to foreign oil, I would not be surprised to see even more such incentives added to the tax code.
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Pasco, Wash.: Jeff
Interesting column -- Sen. Wyden is a pretty creative guy but tilts at a lot of windmills. An observation -- the current tax code tries to be all things to all people but can't afford it. As a result, you get a little bit of scholarship aid, a little bit of disaster relief, etc., all coupled with limitations and complex eligibilities. If we are going to start over, then we need to decide what activity is important enough to incentivize through the code and then do it.
Jeffrey Birnbaum: Ah, but that's the question. What is worth keeping and what isn't? There are as many answers to that one as there are lobbyists on K Street. Which is a lot!
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Portland, Ore.: When I think of Ron Wyden and taxes, I think of him opposing efforts of states to collect sales tax on Internet transactions. That has local appeal due to the technology industry here as well as Oregon not having a sales tax.
Maybe my cynicism shows, but I believe taxes are always being "reformed" to reduce the burden on the contributors to congressmen.
The only tax reform I remember in my lifetime was under Reagan when Democrat Dan Rostenkowski joined with him to help pass "tax simplification". You refer to that reform in your article.
I just don't see this happening without a president who has some popular support and I don't see that as possible until after 2008. The 2008 agenda will be set by the next president who will be stuck with bills to pay for the Iraq war and the start of baby boomer retirement, so is this just the first salvo of a reform that means tax increase?
Jeffrey Birnbaum: It could be the first shot of a battle that doesn't really create much fire at all.
I covered the Tax Reform Act of 1986 and co-wrote a book about it called Showdown at Gucci Gulch. After my co-author and I sent an early copy of the manuscript to a prominent Republican member of the House Ways and Means Committee, he read it and said he liked the story, but that we should remember that passage of the sweeping measure was a "fluke" that would not happen again and probably should not have happened at all.
He might be right. It is amazing that so many interests were vanquished when their loopholes were closed. It's hard to see how that could happen again given the growing strength of K Street. Then again, that strength might well eventually turn into a weakness if there is a populist uprising at some point. That's why Wyden is worth watching.
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New York City: Hi Jeff -- This question is probably better suited for Kurtz, but since I've seen everyone from Lou Dobbs to President Bush to Jack Welch flub this question, I'll ask you your opinion of my analysis. The reason why consumer confidence, and opinions on the economy are so low compared to the actual healthy and expanding economy is roughly 25 percent high gas prises, and 75 percent because the avg. American when looking at the front page, or watching TV see virtually no headlines trumpeting the positive growth in the economy. Meaning, the avg. American does not really think that the economy is bad, rather they have no clue that the economy is good!
Jeffrey Birnbaum: I don't know about your percentages, but your analysis sounds right to me. The lack of "good news" out there about the economy is one reason the White House has been working overtime to trumpet economic advances. The more of that slant that gets into the press, the better off Bush will be politically. I think that some of it is getting out, by the way, and that's one small reason Bush's job approval rating has been making a comeback lately.
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Stamford, Conn.: Will there be anything like the Reagan tax reform during Bush's term or his successor when the current code is the result of years of lobbying?
Jeffrey Birnbaum: I'm not betting on a full-scale rewrite of the tax code of the kind that happened in '86. But a big swing at revising the code is likely and sooner than most people think. The main reason: the alternative minimum tax. That backup tax system, supposedly designed to force the super rich to pay at least some taxes, has become a menace to the upper middle and even the middle income taxpayer. It has had to be "patched" every year to prevent millions of people from getting whacked by it. Eventually, a bigger solution will have to be undertaken and at that point there will be a substantive reason to look at the entire code. Other, political considerations could well push lawmakers in a similar direction. And then, who knows, maybe a big time rewrite could happen? Stranger things have.
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Baltimore, Md.: How do you respond to the view that unless and until we adopt a National Sales Tax, there will never be true Federal Tax Reform in this country?
Jeffrey Birnbaum: I would say that isn't true. Tax "reform" could easily happen without a national sales tax being imposed.
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Montevideo, Uruguay: Do you think any changes in the tax code might impact ex-pats? The U.S. seems to be unusual in taxing world-wide income.
Jeffrey Birnbaum: I don't see any changes happening soon, but ex-pats are always vulnerable as an afterthought to a big tax bill. So are lots and lots of other, usually-out-of-mind interests. When large revisions are made in taxes, some things have to give and the groups with the least clout often get hurt in the exchange.
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McLean, Va.: Jeffrey,
Why do you let posters get away with questionable semantics such as substituting "death tax" for "estate tax"? The tax question is to what extent a person can donate their assets to the entitites of their choice without having to pay tax. Whether the taxpayer is alive or dead is not the issue.
Jeffrey Birnbaum: Opponents of the estate tax like to use the term death tax. I can't stop them, nor should I try.
As for your formulation of the question, that's even more tilted than the term death tax, in my view.
The government can tax whatever it wants, and does. Including assets at death. Whether that's the right way to go about it . . . well, that's the question at hand.
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Jefferson, N.C.: When discussing changes in taxes, I submit that the first change should be some form of carbon tax. Most of the oil we consume is used for transportation, so this tax could be applied as a hefty levy on transportation fuels, including diesel and jet fuel. I would use the income to pay a major portion of the military budget and reduce the taxes on individuals by a like quantity, such that the result is revenue neutral. I would call this an Energy Security Tax, to keep it apart from the gasoline tax which presently is used to fund more highway construction.
I submit that it's becoming quite clear that the U.S. must join with the rest of the world and do something about global warming from burning fossil fuels. A large tax on transportation fuels would get people's attention and provide incentives to purchase
vehicles which are more efficient that we now find. Not only would this approach reduce CO2 emissions, but imports of oil from nations with dubious loyalties would also be reduced.
Jeffrey Birnbaum: With gasoline prices so high lately, not many people are talking about making them higher through carbon tax increases. It seems to many that the marketplace is giving us plenty of reason to search for alternative energy sources. Washington doesn't need to add more.
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Sun Prairie, Wisc.: Jeff, leaving aside whether Ron Wyden brings quite as much to the tax reform table as Bill Bradley did 20 plus years ago, why on earth would Sen. Grassley or anyone else believe President Bush would NOT order up a report on tax reform and then let it gather dust?
George Bush is not Ronald Reagan. Reagan let his Treasury Department work for more than a year not on just a blueprint, but actual draft tax reform legislation. He threw his personal weight behind reform when his own party tried to bury it in the House; he supported Packwood's Senate bill even though large parts of it had not originated in his administration.
And though sympathetic to big business Reagan did not object to the major tax increases on business that made it possible to lower rates in the '86 TRA. It would have occurred to no one that some interest group could get Reagan to block some of these by offering large amounts of campaign contributions to the Republican Party. We can't say that about George Bush, now can we?
Jeffrey Birnbaum: I don't know if we can or we can't.
Your analysis otherwise is spot on, however. When Reagan, a Republican, and Rep. Dan Rostenkowski, a Democrat and the House's chief tax writer, agreed that tax reform must pass, it created a momentum that proved to be unstoppable--almost despite the contents of the legislation.
If Bush were to defy your prediction, he could well get a lot done in taxes--maybe even a major overhaul.
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Re: Lack of "good news": To New York City: you forgot to mention one important reason for the disconnect between the "good" economy and consumer perceptions of a "bad" economy. The benefits of recent economic "growth" are going disproportionately to the wealthy. Several recent studies and articles have supported this assertion. For many working people, the "good" economy is not benefiting them very much, thanks to the economic policies of the Bush administration.
Back to the tax reform debate: what would it take for a "populist uprising" to blunt K Street's ability to block tax reform for the vast majority of Americans who would benefit from a simpler, fairer tax code?
Jeffrey Birnbaum: That would be more than I could surmise off hand. But a surrogate for that question might be answered in the mid-term elections. Might the corruption issue, for instance, create a stampede against incumbents? Might the same happen as a backlash against Bush's policies in Iraq? These are uprisings of the same sort that might create the climate for a major tax reform effort. But will they happen? We will have to wait until November to know.
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Alexandria, Va.: For Irvine, Calif., who wrote, "How would you revise the death tax, so that families can pass down their homes to their children without paying a tax bite for homes that are valued from $3 to $10 million."
So, why shouldn't your fortune of $10 million be taxed? The government needs the revenue, the dead are dead and won't notice it, and the heirs are just getting gravy. In fact, I urge the estate tax be increased to make this a more just and equitable society.
Jeffrey Birnbaum: So take that! Passions do run high in the estate tax debate--which is one reason the effort might falter this year.
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Lawrence, Kan.: Jeff:
As Congress gets closer and closer to adjourning, does lobbying reform get squeezed out? Does it even make a difference, given the remaining content of prospective legislation?
Jeffrey Birnbaum: Two excellent questions.
I do think it is possible that the lobbying/ethics bill could go nowhere this year. Lawmakers are not hearing from constituents that they demand action on the topic, and therefore might simply let the legislation fade away.
If it does pass, even the minimal reforms it will probably contain are better than getting nothing at all. I think that more disclosure, which is the heart of the measure, is much needed. If Congress passes that, all citizens will benefit.
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McLean, Va.: Senator Frist is expected to allow the Senate to act on repeal of the federal estate tax before he retires in four months. With Congress leaving town for the August District Work Period this week and the midterm elections looming, wouldn't this be a good time to do away with this tax forever? What do you think about timing/latest political rumblings from your discussions?
Jeffrey Birnbaum: It's not clear that Frist has enough votes to pass any version of estate tax relief. Therefore, its fate is up in the air.
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Madison, Wisc.: Do you have any ideas, outside of so-called campaign finance "reform," or the ballot box, on how to balance citizen lack of power with lobbying power?
Jeffrey Birnbaum: You gloss over the ballot box as if it were insignificant. It is not. Voters can create change if they want to. Elections are miraculous things. Occasionally, big transformations happen as a result of them. In the meantime, there are other things that can be done (and I'm working on a few suggestions. Back to you later about those.)
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Herndon, Va.: Don't you think a better method would be to look at all taxes combined, federal, state, and local-income, estate, sales, personal property etc? This would allow everyone (our elected representatives and the public) to get a complete picture of what we are providing to the government and what we are getting in return.
Jeffrey Birnbaum: Sounds far too rational to have any chance of passage.
At the same time, lawmakers and policy makers do look at overall tax burdens. As for the return on that investment, that's a calculation you rarely see. How would you measure it anyway?
Government doesn't function like a business, nor should it. It provides a very different kind of service, the measure of which can't be counted as easily as a bottom line.
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Columbus, Ohio: Jeffrey,
How do you define that extremely fine, thin line where government control, business extortion, and political lobbying all meet? Is there too much "order", not enough, or what?
Jeffrey Birnbaum: That's a line that's moving all the time. Lately, federal prosecutors have been changing its color from gray to a darker shade of black (or is red more appropriate?). In any case, the line between those in government and those out of government isn't clearly drawn and that has created all sorts of problems this year. Just ask Jack Abramoff (and Ralph Reed)!
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Manheim, Pa.: Have you ever heard of the book by Jules Archer written in 1973 called "The Plot To Seize The White House". It's about a U.S. Marine corps General Smedley Darlington Butler, who foiled a plot by wealthy American industrailists in the early 1930's to topple FDR and install a fascist dictatorship right here in the USA. I hadn't either until last week when a great friend sent our group the link. It goes along with what we are talking about today: corporations basically taking over and running the country. The book only ever had one printing and has long ago been forgotten about. If you were lucky enough to come accross a copy you probably couldn't afford to buy it. I was taught nothing about this in school. You forget about history [and] it comes back to bite you in the rear. If anyone is interested in reading this book it is available online for all to read for free at
The Plot to Seize the White House
Be ready for a shock when you see the people and well known rich families involved. For any disbelievers this is all backed up with the congressional investagation. It's not fiction, it's fact, Mr. Butler is a true American hero. Now we need another true American hero to stop the corporation take over happening today.
Thank you.
Jeffrey Birnbaum: Haven't heard of the book. Don't know if it's worth reading.
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Washington, D.C.: Considering the current tax system is so complex, highly influenced by powerful lobbying groups and therefore difficult to reform, would it not be more practical to wipe the slate clean and impose a sales tax ("The FairTax")?
Also, what is your position on HR25?
Jeffrey Birnbaum: Luckily, I don't take positions on legislation. I leave that to you.
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Jeffrey Birnbaum: Thanks everyone. That was fun. Let's do it again after my next K Street Confidential column in two weeks. Cheers!
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