1. How do you feel about the status of comprehensive tax reform?
In the context of tax reform, we should keep this in perspective. The House was successful in getting their budget through; the Senate is going to be successful in getting their budget through this week. [Editor’s Note: The Senate approved its budget proposal Oct. 19, after the interview.] Three months ago, I don’t think anyone would have thought that those things were possible.
Republicans, in particular, view this as a political imperative to get done and want it to get done as soon as possible. We, as an association, are preparing for there to be comprehensive tax reform. And our advocacy efforts are in alignment with them getting this done by the end of the year or in the early part of next year.
2. Was it an uphill battle to get the White House and congressional leaders to an agreed-upon framework?
Tax reform’s hard — I think everyone’s figured that out by now. But we think there’s going to be a thorough process in the House of Representatives this year, and that’s going to move on to the Senate. We’ll be weighing in with lawmakers and the administration throughout that process.
One other point I’d like to make — [Sen. Mitch McConnell] made this point the other day — [in President Barack Obama’s] first two years in office, he was not able to get the Affordable Care Act enacted until March of his second year. And Dodd-Frank was the same. That was July of his second year.
Just because there isn’t rapid progress at this point doesn’t mean there won’t be. Big things can be done in even-numbered years.
3. Has there been any movement on limiting the deductibility of interest expense?
As you know, as an association, we’re opposed to any change on the rules relating to interest deductibility. We think this has been normative tax law for 100 years. This is a business expense that should be able to be deducted.
We’re part of a coalition called the BUILD Coalition, which includes as members both the AIC, the real estate industry, the agricultural community. We’re all concerned about any limits to interest deductibility.
I do think we’ve been successful in changing the conversation from one where we’re eliminating interest deductibility completely, which would have been very bad for the American economy, to one whether or not it should be limited in some way.
We’ve already made some significant progress in changing it from [full] elimination to some limit. Limits still are not acceptable to this industry, this association or this coalition we’re a part of. And as the process proceeds, you’ll see us continue to advocate for maintaining full interest deductibility within the code.
4. Some Republicans consider eliminating the deductibility of interest vital to paying for lower corporate or individual rates, especially if state, local and mortgage deductions are off the table. Does this make your job more difficult?
The arguments are the same. I think our arguments about maintaining this, and that it is part of a long-term growth strategy for the American economy, still resonates. Other things are still on the table, but it doesn’t make our arguments for interest deductibility any less poignant. And we’ll continue to make them.
We as an organization, and industry, support pro-growth tax reform and we think pro-growth tax reform involves maintaining interest deductibility.
5. Any discussion about changing the tax treatment of carried interest?
We work very hard to maintain the current position on carried interest. I think we maintain strong support on the House Ways and Means Committee, the Senate Finance Committee and within the leadership of the House and the Senate.
Yes, this is an issue that continues to be raised among the press and some of the opponents of the industry, but we feel very good about the people who are with us. We’ve been successful in convincing most members who will be integral to writing the bill that carried interest should still be treated as a long-term capital gain.
This interview was edited for clarity by Sam Sutton.
Photo of Mike Sommers courtesy of the American Investment Council.