Koch brothers backing Trump tax reform

They didn’t actively back President Trump’s 2016 presidential bid, but the political network tied to the conservative Koch brothers is now gearing up to assist the Trump White House in its push for a tax code overhaul in hopes of shaping the plan congressional Republicans are working on.

Freedom Partners and Americans for Prosperity, two groups that are part of the larger network overseen by industrialists Charles and David Koch, have announced a multimillion-dollar campaign involving paid advertising, direct mail and grass-roots organizing to try to get tax reform across the finish line.

“Our principles mirror much of what the White House has already proposed,” said Freedom Partners spokesman James Davis.

The deep-pocketed network could give Mr. Trump a needed shot in the arm in pushing one of his top legislative priorities. The early buy-in from the network — which didn’t actively support Mr. Trump last year — also stands in contrast to an initial lack of outside cover from similar advocacy groups during the administration’s push to repeal parts of Obamacare.

“Tax reform is one of our top priorities, and our view is the longer we wait, the harder it’s going to get,” one Koch network official said. “We see this as an opportunity to lead and drive the national conversation around our positive vision of tax reform, as well as help generate the significant support with Americans that any reform effort is going to need.”

The Koch network, which opposed Mr. Trump on the original Obamacare repeal bill, has fretted that the president would deepen deficits with an expansive infrastructure package. The Koch groups have also split with the effort to reimpose tougher sentencing policies.

But Freedom Partners has praised the president’s nomination of Justice Neil M. Gorsuch for the Supreme Court, as well as the Trump administration’s goals of cutting spending and overturning the global warming framework established by the Obama administration.

In the brewing tax debate, the Koch network is trying to shape the options, particularly working to block the “border adjustment tax” plan House GOP leaders hope to include.

Advocates say the “border adjustment” tax would boost the manufacturing of American-made goods, which often face overseas tariffs that foreign competitors do not.

“The effect has been a major impediment to retaining and growing more manufacturing jobs in the USA and has resulted in the disenfranchisement of main street America on trade,” testified Zachary Mottl, chief alignment officer for the manufacturing company Atlas Tool Works in Lyons, Illinois, in a recent appearance before the House Committee on Ways and Means.

But Americans for Prosperity has opposed the tax for some time, and recently released a report arguing that it would be a burden on U.S. industries like manufacturing and retail.

House leaders also want to allow businesses to be able to immediately deduct capital investments in their companies, which is a change from the current system that has them do it over a number of years.

But a Freedom Partners official said if Republicans follow through on their goal to pass a plan that’s “revenue neutral,” they could do it without full expensing — potentially creating a conflict with what’s in the House GOP plan.

“If the House insists on revenue neutrality to make the lower rates permanent, they should remove full expensing instead of punishing consumers with a new trillion-dollar tax,” the official said.

Mr. Trump proposed a plan last year that would give U.S.-based manufacturers a choice between being able to fully expense their equipment or keep a deduction on business interest, but Treasury Secretary Steven T. Mnuchin recently told The Economist it’s their “preference” to keep the corporate interest deductibility.

House Republicans, meanwhile, want to allow full expensing but eliminate the corporate interest deduction, figuring that keeping both provisions could effectively incentivize companies to invest in debt.