By Rob Nichols, American Bankers Association President & CEO
Washington is anything but textbook these days, which can make the advocacy work of state and national trade associations a challenge. But the recent tax reform effort proves that certain staples of effective advocacy—functions at which the American Bankers Association and the state associations happen to excel—have enduring value.
All were on display as Congress and the administration worked together on a comprehensive package of tax reforms that we believe will help grow the economy and create jobs. They also will help banks, which previously had one of the highest effective tax rates of any business, better serve their customers and the broader economy.
Those staples of effective advocacy include building respectful relationships and coalitions, speaking with a unified voice, offering expert analysis and showing discretion on when and how to offer public criticism.
We were engaged in the tax reform debate from the very start, offering advice and insight on the potential effects of various provisions—such as the impact of limiting net interest deductibility—and coordinating closely with our state association allies. We also worked closely with other groups in the financial services industry, hosting daily calls to ensure our advocacy was united and effective.
At every turn in the legislative process, we worked respectfully with lawmakers to improve the bill. Recognizing the tightrope lawmakers were walking to create a comprehensive bill that would have sufficient support, we as an industry were careful to offer pragmatic, constructive feedback, not public condemnations or threats that could have derailed the effort.
This approach made a difference. Lawmakers, for example:
- Adopted a careful approach to limiting net interest deductibility, protecting banks’ small business, agriculture and real estate customers, whom we said would be harmed by more substantial limits.
- Heeded concerns about the treatment of pass-through entities like Subchapter S banks and brought the rate closer in line to the “promised” rate.
- Removed provisions that would have eliminated the benefits of deferred compensation plans.
- Corrected an issue relating to income recognition for mortgage servicing rights and other transactions.
- Steered clear of imposing a new bank tax as a means of paying for tax cuts.
- Maintained a variety of tax credits, particularly the low-income housing and new markets tax credits that are so important to our communities.
The result is a final package that is largely aligned with ABA’s core principles for tax reform, with one notable exception: It misses the chance to level the playing field with credit unions and the Farm Credit System. While this is hugely disappointing, it’s not for lack of effort. Bankers have made their views plainly clear to lawmakers for years. We articulated a sound rationale for including these tax-privileged competitors in reform and even offered public opinion research that showed Americans back the idea. In the end, lawmakers viewed this as too controversial to tackle in this bill, but we’ll keep up the fight.
Credit for much of what we did achieve goes to the bankers—from institutions of all sizes and from states across the country—who volunteered their time and expertise to the cause. (If you ever doubted whether association service was meaningful, I can put you in touch with the women and men on ABA’s tax committee who helped comb through each 500-page iteration of the tax bill to identify the potential effects on banks.)
Our policy experts and lobbying staff also made a tangible difference. Together, this banker-staff tax reform team artfully balanced the politics and policy behind a highly complex and highly charged legislative process, and they did so in a manner that kept the door open to congressional leaders and literally earned us a place at the table.
That gave us just a voice, of course, not the final say—and that’s as it should be. Good public policy must consider the views of many. It just so happens the banking industry represents many—from our 2 million employees to the countless communities and customers we serve. That makes effective advocacy a must. I’m proud ABA and the entire industry delivered.
