Daily Beast on Close Call in VAGOV

I spoke to Gideon Resnick of the Daily Beast about the surprising result in the Virginia gubernatorial primary that perhaps shouldn’t have been so surprising in hindsight.

“In this party at this political moment, an anti-establishment firebrand pushing identity politics was bound to get some traction with a staid mainstream Republican as the foil,” Liam Donovan, a Virginia-based former GOP operative, told The Daily Beast. “Throw in a third party, a competitive Dem race, conventional wisdom of a Gillespie rout, and an increasingly ‘selective’ denominator, and you get what we saw tonight.”

Read the entire piece here.

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POLITICO: Deconstructing Kansas

I spoke with Bernie Becker who writes POLITICO‘s Morning Tax tipsheet about the repeal of the infamous Kansas tax cuts and whether it will have an impact on the federal tax reform debate:

Here’s one explanation that was offered for why the two are an imperfect comparison — the design of the Kansas tax cuts, which totally erased taxes on pass-throughs, was so bad that it’s hard to even contemplate anything like it passing in D.C. “I don’t know how you could possibly replicate it at the federal level,” said Liam Donovan, the director of legislative and political affairs at Associated Builders and Contractors and a former top staffer at the National Republican Senatorial Committee. “It’s so egregious — we’re talking about pass-throughs paying zero. It’s almost cartoonish.”

You can read the rest here.

While it didn’t make the story, I laid out for Bernie why the comparison is being misapplied, and how the real lesson of Kansas is being ignored, echoing my tweetstorm from a few weeks back:

It’s not that pass-throughs are bad. It’s not even that steep tax cuts are bad. [But] if you make one business structure wildly preferential, people will seek it out. And if exempt it from tax altogether, katy bar the door.

So you want to invoke Kansas to argue cuts won’t pay for themselves? Fine. But don’t use it to demonize pass-thrus when that mangles the point.

If anything, Kansas experience underscores why it’s important to have equal (or at least similar) treatment regardless of business structure. Should that mean a 15% rate for all? Maybe, maybe not. But you certainly can’t have a 20pt chasm between Main Street and the Fortune 500.

Neither the Trump plan nor the House blueprint would exempt pass-throughs a la Kansas. Nor would either advantage them over C-corps. Only in the administration’s proposal would even be on equal footing.

Bottom line: using the example of Kansas to argue against pass-through parity is at best inapt, and at worst self-defeating. Rate disparities inevitably distort behavior, and a large gap between C-corp and pass-throughs would have a similar effect, just in the other direction.

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Bloomberg: Bumpy Week Casts Cloud Over GOP Agenda

I spoke to Bloomberg’s Sahil Kapur about Trump’s bumpy week and how it might impact the GOP legislative agenda.

Still, the legislative agenda is on shaky enough ground as it is, according to Liam Donovan, a lobbyist and former Republican aide.

“Sausage making is hard enough outside the media vortex of President Trump,” Donovan said. “Each blow complicates the political calculations, strains relations between the White House and Congress, diminishes the President’s leverage, and raises the specter of bigger shoes” to drop, he said.

Full piece here.

I’d add (and did, though it didn’t make it into the piece) that the calendar is already taxed to the breaking point, and that given the health care-tax reform parlay they’ve set up you run the risk of turning the legislative year into a binary event. Without knowing what the future holds, Congressional Republicans would be wise to act swiftly to lock in whatever policy wins they can, even if that means playing small ball.

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