Court ruling allows tools to hinder tax reform

In a world where corporations and unions have growing influence over political races - thanks to a Supreme Court ruling last year - some lawmakers and fiscal hawks worry that the lack of restraints on these groups could cripple efforts to revamp the nation’s tax system.

That court case, known as Citizens United, allowed corporations and unions to freely run issue advertisements throughout federal campaigns, giving them the potential power to help elect lawmakers favorable to their causes, which tax reformers say means companies will spend freely to protect existing tax breaks, such as the mortgage-interest deduction or the lower capital-gains tax rate.

“You just know that you run a political risk under Citizens United when you take on the biggest players - whether its the Wall Street banks, the credit card companies, the for-profit schools, you name it,” Sen. Richard J. Durbin, Illinois Democrat, told The Washington Times. “If you are going to take them on, they are very rich and capable through Citizens United of running an ad campaign. It’s a risk that you run.”

After years of stagnation, the push to reform the tax code has picked up speed on Capitol Hill.

President Obama called for tax reform Wednesday in a speech at George Washington University, and House Republicans have said they are willing to tackle the issue. Meanwhile, the high-profile deficit-reduction commission has said that reforming the tax code is a key part of paring down national deficits and lowering marginal tax rates for individuals and corporations.

But Darrell M. West, director of governance studies at the Brookings Institution, said every one of the tax breaks in the existing tax code has powerful backers in the first place who now, through the high court’s ruling, have another tool to go after lawmakers who try to change tax law.

“Tax reform is hard enough without court decisions that expand the scope of external pressure,” Mr. West said. “It always is difficult to change the tax code, given the fragmentation of Congress and ability of outside interests to block legislation. That is the reason most past efforts at tax reform have failed.”

Rep. Tom Price, Georgia Republican, a member of the tax-writing House Ways and Means Committee, disagreed, saying that “expanding political discourse and encouraging greater freedom of speech should not be seen as a detriment to producing sound policy.”

“In fact, it is just the opposite when more voices can be heard,” Mr. Price said.

The Supreme Court’s 5-4 decision in January 2010 punched a hole in the complex web of federal campaign-finance laws and rules in finding that those groups should have the same rights to spend money on political ads as any person. The decision reignited the debate over the amount of money in federal campaigns. Direct contributions by corporations and unions to individual candidates are still forbidden.

Since then, Democrats unsuccessfully have tried to pass legislation to constrict that right, through transparency and forcing companies to disclose information about their finances.

Asked about the impact of the court decision, former Sen. Alan K. Simpson, the Wyoming Republican who served as co-chairman of the president’s deficit commission, told The Times this week that the ruling simply adds another layer of uncertainty to the debate over tax reform on Capitol Hill, where special-interest groups already have armies of lobbyist to carve out favorable tax codes.

“When you’ve got 180-plus tax expenditures in the tax code, which are utilized by about 2 percent of the American people, you probably have a problem that they were stuck in there by people who could afford to hire the finest people on K Street …,” Mr. Simpson said. “Once you get it into the tax-expenditure system - whether it’s the home-mortgage interest deduction or whatever it is that you love - you got it in there, and you can’t get it out.”