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The Influence Game: Trade Groups Fight Proposed Taxes

By Julie Hirschfeld Davis, Associated Press Writer A look at lobbyists and industry groups who prove their worth by keeping the companies that depend on them out of lawmakers' crosshairs.

WASHINGTON (AP) -- Sometimes, it pays to be paranoid.

That's apparently the belief of the trade group that represents the makers of sugary beverages like soft drinks, sports and energy drinks. It spent more than $7 million in just three months this summer and early fall lobbying Congress as it fought a proposed tax on its products to help pay for health care.

It's a lot to spend to fight off an idea that was, by all accounts, already dead. But it's also a prime example of "defensive lobbying" -- when trade associations and high-priced lobbyists gear up to protect their members and clients from costly action by Congress, even if there's little chance it will ever happen.

The practice is a lucrative, no-lose proposition for lobbyists and industry groups, who prove their worth by keeping the companies that depend on them out of lawmakers' crosshairs. They can always argue convincingly that one can never be certain when Congress, scraping for cash at a time of soaring deficits, might come looking to levy a new industry tax.

Cosmetic surgeons and makers of breast implants and wrinkle-smoothing Botox learned the hard way last month that you can never be too vigilant, after Senate Democrats unveiled health legislation that would slap a 5 percent tax on all elective cosmetic procedures performed after Jan. 1, 2010. Their lobbyists had been told there was little chance that the levy, nicknamed the "Botax," would end up in the overhaul. But with analysts projecting it could raise as much as $6 billion over a decade, it ultimately proved too attractive to pass up for negotiators scrounging for ways to pay for the bill.

Prudent lobbying interests in the capital see it as their mission to be on alert for threats, no matter how remote. Recent examples include the hedge fund industry's fight against a new tax, and efforts of a national farmers' association to forestall regulation of cow methane emissions.

So it is that the American Beverage Association and a broad industry coalition it organized called Americans Against Food Taxes are splashing advertisements across the pages of Capitol Hill newspapers and their Web sites exhorting people to "Help stop the tax." That would be the soda tax that few, if any, believe will end up in the health measure.

The group has spent more than $8.7 million this year lobbying Congress, about 13 times what it spent last year. The sums include roughly $5 million for a television, newspaper and Internet advertising campaign, the cost of an economic study by a professor that found a soda tax could cost the industry as much as $10 billion, and four in-house lobbyists and 15 from outside who reported helping fight the proposal.

That's on top of what individual soda giants have spent to influence lawmakers this year, including $4 million at Pepsico Inc. and more than $4.5 million at The Coca-Cola Company. Both had some 20 lobbyists signed up to tackle the sugary drink tax. Coca-Cola Enterprises Inc., Coke's bottler and distributor, had another nine lobbyists on the case at a cost of $1 million-plus.

Kevin Keane of the Beverage Association acknowledged that the likelihood that sugary drinks will be targeted is remote -- partly, he says, due to the "effective way we've engaged on this issue." Another factor: such a tax would be unpopular with the millions of consumers who would be nicked by it. But Keane said there are no guarantees, particularly as lawmakers look toward crucial final negotiations on the health measure.

"There's still a long way to go in the process," he said. "Anything's at risk at that point."

He called the proposed tax "the biggest threat we've faced at the federal level in a long time."

And like many defensive lobbying campaigns, the soda makers' effort is geared at least partly toward protecting the industry in the future. Even if soft drink companies are spared in the health measure, they fear being targeted in other upcoming legislation. Or, as one lobbyist involved in the effort put it, "These guys know they've got a big target on their backs now."

Their defenders are hardly the only lobbyists in town spending lots of time and energy on a proposal that isn't likely to be enacted.

The American Farm Bureau Federation launched a feverish campaign earlier this year to fight the imposition of a "cow tax" -- a proposal it warned could force farmers to pay a pollution fee for bovine belches as part of climate change legislation. Never mind that the Environmental Protection Agency had said it had no intention of regulating methane, the gas released when cows burp, and its administrator Lisa Jackson called reports of such a levy "ridiculous notions."

The hedge fund industry and private equity firms are still spending freely on lobbying Congress -- almost $5 million so far this year, according to disclosures compiled by the Center for Responsive Politics -- including a fight against a $24 billion tax on them that was proposed in 2007 but has since been shelved.

The lightly regulated investment funds now are more focused on how a broad financial regulation overhaul could affect them, according to lobbyists familiar with their activities in Washington, but they also recognize that lawmakers could always decide to revive the tax proposal. It would change tax rules that let fund managers pay a capital gains rate of 15 percent on a chunk of their earnings, instead of the top income tax rate of 35 percent.

"Companies lobby because it works, and conversely, if they don't lobby, they'll get included in proposals where they're the ones on the chopping block," said the Center's Sheila Krumholz. "In other words, if you can't beat 'em, join 'em."