Kochs Lobby Against Tax Breaks for Koch Industries

Libertarian philanthropists say cronyism is bad, even when they benefit from it

December 3, 2014

Conservative groups frequently derided as tools of powerful business interests are lobbying hard against a package of tax breaks for American businesses.

The company owned by billionaire philanthropists Charles and David Koch, as well as groups frequently associated with the fraternal libertarians, are pushing Congress to let 55 tax breaks expire, including several that provide billions in tax relief for corporations such as Koch Industries.

The various tax breaks are theoretically temporary, but have been consistently renewed. Together, they provide roughly $45 billion in tax relief to individuals and businesses each year.

House leaders expect the full package of tax extenders to pass despite opposition from conservative groups that either oppose tax preferences for specific industries or hope to see the various provisions considered individually.

"We oppose ALL subsidies, whether existing or proposed, including programs that benefit us, which are principally those that are embedded in our economy, such as mandates," wrote Philip Ellender, president Koch’s government affairs division, in a Wednesday letter to members of Congress.

Ellender singled out the wind production tax credit as particularly deleterious. But unlike that provision, some of the tax breaks included in the House package benefit activities in which Koch and its subsidiaries are heavily invested.

Koch subsidiary George Pacific, for instance, qualifies for a tax break for the production of cellulosic biofuels. Another subsidiary, Flint Hills Resources, operates biofuel production facilities that could benefit from another of the provisions.

Those tax breaks could improve Koch’s bottom line, but the company sees federal tax preferences in general as economically harmful.

"Koch doesn’t view these as ‘benefits’ even if they are in industries we’re in," explained a source familiar with the company’s public affairs strategy. "They are wasteful and market distorting, and allow other firms to run businesses that aren’t making money any other way."

Americans for Prosperity, an influential conservative group with ties to the Kochs, suggested that the wind PTC is just such a provision.

"We just have a particular dislike for wind subsidies, since that sector has so little to show for the massive subsidies received over the past few decades," Levi Russell, a spokesman for AFP, said in an email.

But like Koch Industries, he said, "we oppose corporate cronyism of all forms." AFP is encouraging lawmakers to vote against the full package of tax extenders.

While Democratic lawmakers and members of the media insist that the Republican Party marches in lockstep with Koch Industries, whose owners are Republican donors, the tax extender package appears headed for passage despite opposition from Koch Industries, and that of groups with which it is associated.

The House likely will not split the package into stand-alone provisions that can be voted on individually, a position supported by Heritage Action for America, another prominent conservative group.

"Each provision should be allowed stand or fall on its own merit, and the vast majority of these provisions would not survive such scrutiny," said Heritage Action spokesman Dan Holler in an emailed statement.

Pro-business groups such as the U.S. Chamber of Commerce support the package of tax extenders. Americans for Tax Reform, a group that works to minimize the American tax burden generally, also supports it.