TV Spots Pressure Johnson on Tax Reform

45Committee has begun airing TV spots in Wisconsin that attempt to pressure U.S. Senator Ron Johnson into supporting the Republican Tax reform proposal. Johnson has come under fire from some Republicans for the manner in which he voiced opposition to the plan. Wisconsin Congressman F. James Sensenbrenner told Milwaukee talk show host Mark Belling last week that Johnson was “strutting around like a peacock” in his opposition to the bill.  “You know, there are ways you can fix things with a phone call rather than threatening to bring down the whole house of cards and the Senate proving itself to be a dysfunctional body,” Sensenbrenner told Belling.

A voice over announcer in the ad says:

What’s in it for Wisconsin? The Republican Senate tax plan would save middle-class Wisconsin families more than $2,600 a year. The first $24,000 of family income would be tax free.  And lower tax rates would help small businesses grow, boosting our economy and creating more than 18,000 Wisconsin jobs. We elected Ron Johnson to cut taxes, and now we’re counting on him to deliver. Urge Senator Johnson to vote yes on tax reform.

In an interview with Media Trackers Director of Communications Jerry Bader, Johnson responded to the ad:

 “I’ll first say in both elections I never promised to cut anybody’s taxes, because I was concerned about the 20 trillion dollars of debt, I still am, and very few people are focusing on that. What I’ve said consistently is that right now our business tax system is completely uncompetitive globally, and my issue is I think it’s a table stakes move we have to make, we have to make American businesses competitive globally, but we also have to maintain the competitive position and balance of domestic businesses while we’re doing that, and clearly neither the house or senate version of the bills do that and I think that everyone is admitting it.”

Another source told Media Trackers that 45Committee plans on spending $65,000 in the Green Bay television market this week on the ad. According to factcheck.org, 45Committee is a 501(c)(4) advocacy organization companion to the Future45 Super PAC:

…focusing on “policies that promote jobs and economic opportunity for American families, strengthen national security, fix what’s broken in education, energy, immigration, health care and more,” according to its website.

As a 501(c)(4), the 45Committee can receive unlimited funds from donors, but does not have to disclose the sources of its funding.

Johnson has complained that the plan unfairly benefits corporations more than other types of businesses. A Republican source who knows Johnson personally told Media Trackers that Johnson’s opposition may stem, at least in part, from frustration that someone with his business experience wasn’t give a seat at the table as the plan was being constructed.

Johnson responded to this:

“Well I will certainty admit to being frustrated because I have been raising this issue for months, I’ve got my own ideas for how to do this, a far better plan, it was ignored, fine. So I’m working within the framework of what these plans are, but no I’ve been working on this issue, had dinner with the speaker two weeks ago or maybe three weeks ago and raised this as an issue when I heard the 70/30 split of that construct in house ways and means and said this is completely unacceptable and it’s got to be fixed, and it wasn’t fixed, and the senate wasn’t going to fix it. So the only way this was going to get fixed was to raise the issue which is what I did last Wednesday and low and behold, now i’m getting the information and I think i’m pretty optimistic that there are some pretty reasonable fixes within the constraints of the 1.5 trillion dollars. Had I not raised my voice I would have continued to be ignored and this issue would not have been first of all raised and it certainly not have been fixed.”

 

The Wall Street Journal opinion page last week offered a plan to assuage Johnson’s concerns:

Mr. Johnson is mainly concerned with the relative treatment of corporations compared with so-called “pass-through” businesses that pay taxes at the individual tax rate. In both the House and Senate bills, the top tax rate for corporations falls to 20% from 35%. But S corps and pass-throughs get a smaller tax cut. In the Senate bill they get a 17.4% deduction from their income that is taxed at the new top Senate individual rate of 38.5%, which results in a top rate of 31.8%, well above 20%.

 

The comparison leaves out that corporate income is double-taxed through dividends and capital gains, which raises the overall level of corporate taxation to 39% under the Senate bill. But then pass-throughs would also pay the 3.8% ObamaCare surcharge on top of that 31.8%, and Mr. Johnson is worried that they also can’t deduct for state and local taxes while corporations can, which adds several more percentage points in high-tax states.

 

All told Mr. Johnson thinks corporations get a better deal in the reform bills, and he’s holding out for some better pass-through treatment. One solution would be to let them deduct state and local taxes, and another would be to increase the size of the 17.4% deduction.

Johnson responded:

“The Wall Street Journal is at the same disadvantage that I was earlier last week where they just don’t have the information. We unfortunately constrained ourselves to this 1.5 trillion dollar static score, growth will more than make up for that, I was suggesting 2-3 trillion dollar static score so we could actually honor the principal and promises of the framework, to recognize we can’t leave pass-throughs behind as we drop the corporate rate down to 20% to be globally competitive and came up with the 25% pass-through rate, they just didn’t honor that. Both the senate and the house bill have that rate really closer to 32-35%, tack on the 3.8% Obamacare tax which should have gone away, again pass-throughs are at a huge disadvantage.”

“I’m working on a number of different scenarios, not that I reject what the Wall Street Journal is talking about, but the scores of what they are talking about may not be doable within this 1.5 trillion dollar constraint. State and local taxes, that’s one of the disparities between c-corps, they can deduct them from income taxes, pass-throughs can’t, one solution that doesn’t cost money and actually raises revenue, don’t allow corporations to deduct state and local income taxes either, that is actually and easier way of solving this problem.”

 

The full interview with Senator Ron Johnson can be found here: