Silicon Valley Supports Tax Reform

By STEVEN OVERLY Updated at 2017-09-30 14:10:52 +0000

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Silicon Valley is racing to support and shape President Donald Trump’s multitrillion-dollar tax proposal, despite months of distancing itself from his policies on everything from immigration to climate change.

The Republican proposal to slash corporate tax rates and ease taxation of companies’ overseas earnings has vast implications for the tech industry, which counts the wealthiest companies on earth among its ranks. The companies have responded by marshaling an army of lobbyists, some with connections to a Trump administration that many of their customers and liberal employees loathe.


BY STEVEN OVERLY of Politico

Tech companies tapped 546 tax lobbyists in the first half of 2017, more than during any of the previous six years, according to data from the Center for Responsive Politics.

No other policy issue facing tech companies in Washington — and there are many of late — stands to have as great an impact on their businesses as an overhaul of the tax code. Tech giants want Congress not only to chop the corporate tax rate but to allow them to pay less tax if they bring back home the cash they hold abroad. Apple, Microsoft, Cisco, Google’s parent Alphabet and Oracle top the list of U.S. companies with the biggest overseas cash piles, according to Bloomberg data compiled in June. Apple alone has a staggering $246 billion in cash outside the U.S.

Those numbers help explain why the tech sector — despite its frequent fractures with Trump — has resisted calls to fully disengage from the administration: It needs to keep a foot in the door as Republicans draft and usher through their plans for a major tax overhaul.

"There are also times where we disagree with their point of view and where they want to take policy, and we speak up at that point,” said Linda Moore, the CEO of TechNet, an industry advocacy group. But she added: “We do want to support them on tax reform. That is a great example where: ‘We're behind you 100 percent. What can we do to help you get that done?'"

That stance doesn't sit well with liberal activists who have been urging Silicon Valley to abandon Trump since the earliest days of his administration.

"Tech companies like to paint themselves as innovative, ethical and inclusive institutions. However, when it comes to tax reform, many are tempted to follow their bottom line in a corporate free-for-all," said Reem Suleiman, a senior campaigner with the progressive group SumOfUs.org. "So Silicon Valley has a dilemma: Stand up for the values it touts, or take advantage of Trump's corporate coup over our democracy."

On the lobbying front, tech firms have sought out Trump-connected lobbyists for tax and other issues. Amazon tapped Trump transition staffer Dan McFaul and Trump campaign fundraiser Brian Ballard, both of Ballard Partners, at the start of the year. Microsoft worked for a time with Navigators Global's Andy Keiser, who also worked on the transition, and brought on Sextons Creek's Bill Smith, a longtime aide to Vice President Mike Pence.

Tech CEOs have also been their own advocates. Tax reform was one of the topics discussed in June at closed-door meetings between senior White House officials and tech executives, including Apple CEO Tim Cook and Amazon CEO Jeff Bezos. Industry leaders made a separate appeal directly to National Economic Council Director Gary Cohn and Treasury Secretary Steven Mnuchin in a private meeting earlier this year.

That behind-the-scenes influence building has ramped up even as tech companies publicly condemn the president's actions on a range of other issues. With each controversial decision emanating from the White House — banning travelers from certain Muslim-majority countries, abandoning the Paris climate deal and responding to racist violence in Charlottesville, Va., by blaming “many sides” — tech CEOs have blasted the policies as bad for the economy and American competitiveness.

The decision to end the Deferred Action for Childhood Arrivals program this month drew a particularly strong reaction from industry players, including the chief executives of Google, Apple, Facebook and many other firms. Microsoft President Brad Smith even said Congress should make legal protections for DREAMers a greater priority than tax reform — a bold stance that turned out to be an outlier in the tech industry.

The tech sector has resisted pressure to cut all its ties with the president, with some executives like Cook explaining their decision as a patriotic or moral duty to provide counsel to whoever is in the White House. "I feel a great responsibility as an American, as a CEO, to try to influence things in areas where we have a level of expertise," Cook told Bloomberg Businessweek in June.

Those efforts may be bearing fruit if the Republican tax framework released Wednesday is any indication. Though devoid of many details, the proposed plan would drop the corporate tax rate to 20 percent from 35 percent, preserve research and development tax credits, effectively eliminate U.S taxes on future overseas revenue and allow corporations to bring home trillions of dollars they have stashed abroad at a one-time low tax rate — all provisions the tech industry has fought for.

Tech companies, like other big corporations, assert that money brought back to the U.S. could be used to hire workers or build factories, an argument that dovetails with Trump's America-first economic agenda. In May, when Cook announced plans for a $1 billion fund to invest in U.S advanced manufacturing projects, he said Apple would borrow the money because the “bizarre” U.S. tax code makes it financially painful to repatriate its overseas cash.

The issue has also taken on greater urgency as foreign regulators start raising questions about companies' offshore tax strategies, lobbyists said. The European Commission in 2016 slapped Apple with a 13 billion euro penalty for allegedly accepting a sweetheart tax deal from Ireland.

While tech's vocal opposition to Trump during the election and on recent social policies leaves a "bitter taste" for some Republicans, ultimately GOP leaders want Silicon Valley involved in the tax reform effort, said Keiser, the principal at lobby shop Navigators Global who served on Trump’s transition team.

"Getting tax reform right and encouraging broad economic growth is far more important to the policy and the politics than trying to extract a pound of flesh against tech, one of America's most important industries," Keiser said.

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