Victory on check-the-box shows corporate lobbyists have more sway than financials.
The Obama administration’s budget plan contains some painful tax hits for financials. Private equity and hedge fund managers would see their carried interest taxed as income, not capital gains. And the $90 billion TARP bank levy remains intact, although Treasury officials now say it won’t apply to the repo market, which should be a relief to banks. But corporates have derailed on one big item that was worrying them: check-the-box isn’t being repealed, as many feared.
This may reflect the greater standing of the corporate sector vis-a-vis the financial sector in the eyes of legislators, and rightfully so—after all, corporates didn’t cause the financial crisis that bloated the budget to the point where tax increases are inevitable. However worrying the Obama administration’s plan to target the transfer of intangible assets among overseas subsidiaries, such a move, if implemented, would only pull in only an estimated $27.4 billion over ten years, as opposed to the $90 billion the administration hoped to reap from repealing check-the-box.
This capitulation on the administration’s part reveals that treasurers can push back successfully against elements of the budget proposal. But to ensure companies get the most bang for their lobbying buck, they need to speak with a coherent voice. This is the time for treasury to re-scrutinize the administration’s tax plans, double-check priorities and make sure lobbyists stay on point.