Everyone wears fine suits in Washington, even in 80% humidity and faulty air conditioning, and they stride everywhere with purpose, and they’re all so engaging and very smart. Walking past the Supreme Court from the Cannon House building to the Hart, onto our next round of meetings alongside a hundred similar groups, I chafed at the notion that “our political system is broken.” I’d say our system works quite well, thank you.
Of course, this was my first time participating in the American Car Rental Association’s (ACRA) day of meetings on Capitol Hill with members of both the House and Senate and their staffers. Perhaps after a few more of these days, I’d get just a bit jaded. But as an American — participating in the very process we learn about in school — it’s hard not to be in awe and a little bit humbled.
We had 32 participants split into five groups. Our purpose was to, as ACRA’s lobbyist Greg Scott puts it, “Build relationships and make friends before you need them.” We were plain folks looking to convey how certain issues would affect our business lives. We learned. We made our points. It was a successful day.
And they listened. Certainly, it’s their job to listen, but they made a point to express the importance of this forum. “I give you my card for a reason,” said Nancy Pelosi’s tax adviser. “We don’t like to vote with our eyes closed.”
“You have to let us know the specifics on these issues,” U.S. Rep. Jason Chaffetz (R-Utah) said. Orrin Hatch’s adviser echoed these points. “We have limited bandwidth. It’s useful to talk to you,” he said.
Our talking points on this day centered on peer-to-peer issues, car rental excise taxes, and like-kind exchanges (LKE).
Our delegation visited the offices of U.S. Rep. Jason Chaffetz (R-Utah). Chaffetz explained the importance of face-to-face interaction to understand the issues. He said peer-to-peer issues would likely be taken up by the House Committee on Science, Space, and Technology.
Regarding peer-to-peer, I felt like we were treading new ground in terms of education on the model itself, which would set the stage for later policy decisions regarding an even playing field regarding regulation for all players.
We explained the undue burden that excise taxes place on car rental customers and how Congress has the right to regulate excise taxes as interstate commerce. We looked to gain momentum and more co-sponsors on bipartisan legislation in both the House and Senate.
Discussions on LKE — at least the ones in our group — took on greater detail.
There is no eminent legislation affecting LKE, which allows companies to swap an investment asset (i.e. a rental car) with another and defer the tax on the proceeds until the property is sold for cash. However, LKE is becoming part of the larger conversation on tax reform, which started with the 2014 Camp Tax Reform Act that purported to make the tax code simpler and lower the corporate tax rate to 25%.
The plan was “dead on arrival,” as Paul Ryan’s policy adviser put it, “but it got the conversation started.”
In getting to a 25% corporate rate, a lot of tax provisions that benefit a limited number of taxpayers (or “loopholes” in the minds of some reformers) would be on the table. While we see LKE not as a loophole but as an engine for business reinvestment, it still has a dollar sign attached to it when trying to balance a budget. “I’ve been in rooms late at night when you’re trying to pay for something and everything is on the menu,” said Pelosi’s adviser.
Our counter was to look at LKE through dynamic scoring, not static. While getting rid of LKE may trim $48 billion on the way to compensate for lowering the corporate tax rate, we believe it would also have a more sizable negative impact on GDP — potentially 3% to 4% — because it would restrain a company’s cash flow and its ability to reinvest in the business.
Within this argument, we made sure to state that the car rental industry buys 1.2 million cars a year, or 1 in every 10 sold. We brought up a study by Avis Budget Group on how a repeal of LKE would essentially prevent it from investing in new fleet moving forward. These statements reached their targets in a few conference rooms. However, the real impact came twofold: First, Sharky Laguana, owner of van renter Bandago, explained how his small company (and thousands like him) wouldn’t benefit from a 25% corporate tax rate anyway.
Then K.C. Baack, a member of the Budget Atlanta franchise, chimed in. He said that after the company owners bought the franchise, they were able to grow the fleet by close to four times in just a few years. “We simply could not have done that without the benefit of LKE,” Baack said.
These statements, delivered in person by constituents running small businesses, magnify the power of the Avis study tenfold. This is the democratic process. This is why we do this. “We (lobbyists) are not the important ones in these situations,” Scott told us in between meetings. “You are.”