NEW YORK — The message from the billionaire-led Koch network of donors to President Trump and the Republican Congress it helped to shape couldn’t be more clear: Pass a tax overhaul, or else.
As the donors mixed and mingled for a policy summit at the St. Regis hotel in midtown Manhattan last week, just a block south from Trump Tower, it came up again. And again. And again.
“It’s the most significant federal effort we’ve ever taken on,” said Tim Phillips, president of Americans for Prosperity, a Koch-aligned group with offices in 36 states. “The stakes for the Republicans, I’ve never seen them this high.”
Many in the Koch network, a vast group of libertarian-leaning nonprofits and advocacy and political organizations, described the upcoming legislative push for a tax overhaul as an inflection point in modern political history, a do-or-die moment that would define whether their efforts over the years will pay off or not. The network leaders plan to dedicate much of their two-year $400 million politics and policy budget to the effort — though they wouldn’t give an exact number.
And any notion of failure was discussed in dire terms.
“This is the crux issue,” said Chris Wright, a Koch donor and CEO of Liberty Oilfield Services in Denver. He predicted that Republicans would “pay a heavy price” in the 2018 midterm elections if the effort fails, explaining that donors and activists alike would walk away from the party.
“If you give someone the leadership baton, you expect them to get something done,” Wright explained.
These are complicated times for the Koch network, which was founded by billionaire brothers Charles and David Koch, who are the 11th and 12th richest people in the world with $47.6 billion apiece, according to the Bloomberg Billionaires Index.
Their massive organization, which funded elements of the Tea Party movement back in 2010, rightfully deserves a major share of credit for creating a complete Republican takeover of the federal government, along with the vast majority of state houses and governorships. But the Kochs and aligned groups have an uneasy relationship with GOP standard-bearer Trump, whose nativist instincts and ideological volatility they dislike.
They didn’t back him in the 2016 election, with Charles Koch famously comparing the choice in the presidential campaign to picking between having cancer or a heart attack. And they could find themselves in conflict with a rival network of donors led by Robert Mercer and his daughter Rebekah, who are more willing to further foment a civil war in the Republican Party by taking aim at some of its established leaders and policy priorities. The Mercers are backing an effort by former Trump strategist Stephen Bannon to find primary challengers to most Senate Republicans, including lawmakers the Kochs have long supported, like Arizona’s Jeff Flake.
During the summit, Trump’s name hardly came up in sessions open to the news media. When it did, donors chuckled at a quip about the president’s imprecise threat to revoke NBC’s license to broadcast (the network doesn’t have one, individual stations do). They listened intently as reporters from NBC, The Washington Post, and Time Magazine — all news outlets the president derides regularly — described what it’s like to cover a president who makes news by the bushel, especially when he tweets up a storm early in the morning.
Even some speakers addressed the ambivalence toward the president.
“There are things I would say or tweet differently. Absolutely,” said Wisconsin Governor Scott Walker, as he addressed the Koch group during a lunch at the St. Regis.
As many did at the summit, Walker tried to draw a line between Trump and his staff. “Scott Pruitt alone is enough to make me stand up and say: ‘Hallelujah!’ ” he said, praising the head of the Environmental Protection Agency. The Koch Companies Public Sector LLC used some of its $3.1 million lobbying in the first three months of this year to push for Pruitt’s confirmation.
Walker described Trump’s Cabinet as “one of the best Cabinets we’ve had in my lifetime.” It includes other Koch allies, notably Education Secretary Betsy DeVos, the charter school advocate whose family has given generously to the Koch networks. (Tom Price, who was Trump’s secretary of Health and Human Services until last month when he resigned in disgrace, had accepted tens of thousands from the Kochs as a member of Congress.)
Vice President Mike Pence, who addressed the group on Friday, referenced the tension too — and tried to move on to that issue where he knew there would be agreement: tax reform.
“Whatever differences some in the room may have had in the campaign of 2016, the president sent me here today to say, ‘Thank you for your strong support of our agenda this year in 2017,’ ” Pence said.
Tax overhaul seen as vital
The Trump administration along with Republican leaders proposed a tax overhaul that would slash rates for the rich and some in the middle class. The corporate tax rate would be cut to 20 percent. The proposed framework would amount to a $1.5 trillion tax cut, according to the Tax Policy Center.
“We need every ounce of your energy and enthusiasm,” Pence told the group of donors. “We need you to reach out. Use your voice,” he said. “Talk to your employees, talk to your suppliers, your fellow business leaders to get them on board.”
Indeed, one of the panels for donors was dedicated to ways in which they could personally influence the process (the session wasn’t open to reporters).
Koch donors openly fretted about every aspect of tax reform, from whether the timeline for passage could slip past Thanksgiving (it almost certainly will) and what the corporate tax rate will be in the final legislation. They went deep in the weeds, with one donor pressing senators about changes to the Subchapter K Partnerships in the tax code. Another explained that he wants Congress to completely erase the interest deduction.
Phillips, of the Kochs’ Americans for Prosperity, cut straight to the chase in a panel discussion he moderated on tax reform with two Republican senators.
“How worried should folks in this room be?” asked Phillips, addressing the chatter in Washington that Republicans will fail to pass tax reform the same way they failed to repeal and replace Obamacare.
The answer was not encouraging to the audience, which listened in an ornate, top-floor chamber at the St. Regis where on Thursday the price for rooms started at $1,095 per night.
“I’m very concerned,” said Senator David Perdue of Georgia.
“Herding cats is sometimes easier than keeping our team on the same page at the same time,” explained Senator Tim Scott of South Carolina.
But senators also understood that the price of failure to pass a tax overhaul will be steep — and could threaten their majority in the House of Representatives in next year’s elections.
“If tax reform crashes and burns, we could face a bloodbath,” said Senator Ted Cruz of Texas. “We have the potential of seeing a Watergate-like blowout,” he added, referring to the 1974 election where Democrats picked up 49 seats in the House and four in the Senate.
An expensive event
The Koch event, formally called the Policy and Political Strategy Planning Retreat for The Seminar Network, attracted about 100 donors along with eight state and federal elected officials — all conservatives. David Koch attended events Thursday and Friday. On Thursday night, as he left the St. Regis, he ignored a few questions from reporters before slipping into the back seat of a silver Mercedes Maybach idling curbside on East 55th Street.
Donors sipped champagne in the evening, and enjoyed white roses in the morning and purple ones at night. The crystal water glasses were so thin they sounded like wind chimes when they knocked against each other as a waiter walked by with a tray full of them.
It’s the kind of gathering that makes Democrats’ blood boil — the Koch brothers have been mentioned by Democrats on the House or Senate floor at least once a month since the election, and usually once a week.
Those who’ve mentioned them include Democratic Senator Bernie Sanders, who railed against their influence in a budget plan that included a provision allowing the tax overhaul proposal to pass with a simple majority vote.
“This is not a budget for economic growth,” thundered Sanders from the Senate floor earlier this month. “This is a budget paid for and fought for by the Koch brothers and a handful of billionaires who will gain very handsomely if this budget were to be passed.”
But the Kochs occupy only one part of the shifting constellation of Republican groups. The ascendant donor clique now is led by the Mercers, a New York billionaire family. The Mercers were once aligned with the Kochs, giving $2.5 million to their super PAC when it first was established.
“We hate them and they hate us,” said Charles Johnson, the founder of the conspiracy-peddling site GotNews, who is allied with Bannon and the Mercers. Bannon declined to comment for this story.
The Koch officials played down any competition and noted that they’re having a banner fund-raising year. “We have the utmost respect for Mr. Mercer,” said James Davis, a spokesman for the Koch-aligned network. “He’s an accomplished business leader and he’s been a good partner on a number of projects.”
Policy-wise, the Kochs clash with the Mercer/Bannon wing in two key areas: trade and immigration. The Kochs have been critical of Trump’s Muslim ban and his bid to build a wall. They also embrace the multinational trade deals that Bannon’s group, with its nationalistic orientation, wants to shatter.
In terms of tactics, they’ve traditionally parted ways as well. Bannon wants primary challengers for sitting Republicans, and the Kochs have largely stayed out of directly funding those fights.
If there is a brewing fight between the Mercer group and the Koch group, the Democrats are watching eagerly.
“Will the Kochs’ brand of conservatism clash with the Bannon brand? Will you see that play out in the 2018 midterms?” asked Charles Baker, a Democratic strategist and former adviser to Hillary Clinton’s campaign. “If that’s true, most people on the left will be wondering if they want the cobra or the mongoose to win.”Annie Linskey can be reached at firstname.lastname@example.org. Follow her on Twitter @annielinskey.