Republicans finally offered an explanation for the ‘Corker Kickback’ — it just doesn’t make sense

Judd Legum

Judd Legum Think Progress

Why was a provision quietly added to Congress’ final tax bill specifically to benefit the owners of real estate “pass-through” corporations, a group that includes President Donald Trump and Sen. Bob Corker (R-TN)?

The provision in question is a special deduction for “pass-through” corporations — businesses that pass their income to their owners who include them in their personal tax returns. The Senate version of the bill required businesses to actually pay wages to avail themselves of the deduction. This “wage rail” helped ensure they were legitimate businesses and not just people gaming the system. But the final tax reform bill includes a special exemption for real estate companies that pay little or no actual wages.

Republicans attempted to offer an explanation for this provision on Monday afternoon, delivered in the form of a letter to Corker from Sen. Orrin Hatch (R-UT). But Hatch’s explanation ignores the key questions about the controversy and tries to spin the issue into one of process minutiae.

Hatch begins by saying that he is “disgusted” that the media is even drawing attention to the issue. He then sets up two strawman arguments.

First, Hatch refers to a statement from Sen. Ron Wyden (D-OR) in response to the last-minute provision that was published in the International Business Times. “This new real estate carve out was airdropped in at K Street’s bidding, widens the proposed passthrough loophole and gives away an even bigger tax cut to Trump and his wealthy friends,” Wyden said. Hatch seizes on the word “airdropped,” noting that there was a similar provision in the House version of the bill.

The provision in the GOP’s final tax reform bill, however, is different than the one that initially appeared in the House version. While the House bill would have allowed any passive owner of a “pass-through” corporation to claim a special deduction, the final version of the tax reform bill is more narrowly tailored to capital intensive businesses like real estate.

“This last-minute provision will significantly benefit the ultra-wealthy real estate investor, including the president and lawmakers on both sides of the aisle, resulting in a timely tax-reduction gift for the holidays,” Harvey Bezozi, a certified public accountant, told Bloomberg News.

Hatch doesn’t even attempt to defend this provision on the merits. Why, in a bill that is supposed to encourage job and wage growth, are lawmakers providing special tax benefits to people who set up real estate corporations that are little more than a legal fiction? Without this provision, people would need to prove that they actually pay people wages before qualifying for the deduction. The entire purpose of the wage test is to prevent the system from being gamed by individuals, which this provision significantly undermines. What is the justification for creating an exemption? Hatch does not say.

Second, Hatch takes issue with the implication that Corker requested the change. (By saying it’s an implication, of course, Hatch acknowledges that no one is actually explicitly making that claim.) “I am unaware of any attempt by you or your staff to contact anyone on the conference committee regarding this provision or any other policy matter,” Hatch writes.

But whether Corker requested the provision or not, Hatch does not dispute that Corker will benefit from it. It is specifically designed to benefit people like him who own pass-through real estate corporations.

Critically, neither Hatch nor Corker has offered a substantive explanation of why Corker is now supporting the final tax bill.

Corker cited deficit concerns to explain why he voted against the Senate version of the bill. The final tax legislation is even worse from a deficit perspective. But Corker and Hatch insist his shift in position had nothing to do with the inclusion of a new provision that improves the tax treatment of Corker’s own real estate investments.

If not the “Corker Kickback,” then what changed Corker’s mind? With the Senate vote just a couple of days away, that question still hasn’t been answered.

***

Reposted from Think Progress

Posted In: Allied Approaches

Union Matters

Get to Know AFL-CIO's Affiliates: National Association of Letter Carriers

From the AFL-CIO

Next up in our series that takes a deeper look at each of our affiliates is the National Association of Letter Carriers.

Name of Union: National Association of Letter Carriers (NALC)

Mission: To unite fraternally all city letter carriers employed by the U.S. Postal Service for their mutual benefit; to obtain and secure rights as employees of the USPS and to strive at all times to promote the safety and the welfare of every member; to strive for the constant improvement of the Postal Service; and for other purposes. NALC is a single-craft union and is the sole collective-bargaining agent for city letter carriers.

Current Leadership of Union: Fredric V. Rolando serves as president of NALC, after being sworn in as the union's 18th president in 2009. Rolando began his career as a letter carrier in 1978 in South Miami before moving to Sarasota in 1984. He was elected president of Branch 2148 in 1988 and served in that role until 1999. In the ensuing years, he worked in various roles for NALC before winning his election as a national officer in 2002, when he was elected director of city delivery. In 2006, he won election as executive vice president. Rolando was re-elected as NALC president in 2010, 2014 and 2018.

Brian Renfroe serves as executive vice president, Lew Drass as vice president, Nicole Rhine as secretary-treasurer, Paul Barner as assistant secretary-treasurer, Christopher Jackson as director of city delivery, Manuel L. Peralta Jr. as director of safety and health, Dan Toth as director of retired members, Stephanie Stewart as director of the Health Benefit Plan and James W. “Jim” Yates as director of life insurance.

Number of Members: 291,000 active and retired letter carriers.

Members Work As: City letter carriers.

Industries Represented: The United States Postal Service.

History: In 1794, the first letter carriers were appointed by Congress as the implementation of the new U.S. Constitution was being put into effect. By the time of the Civil War, free delivery of city mail was established and letter carriers successfully concluded a campaign for the eight-hour workday in 1888. The next year, letter carriers came together in Milwaukee and the National Association of Letter Carriers was formed.

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There is Dignity in All Work

There is Dignity in All Work