- The Washington Times - Monday, June 10, 2019

The National Federation of Independent Business, once the unrivaled voice for small businesses and their Republican allies in Congress, is grappling with troubling finances, reduced membership and diluted clout in Washington.

The NFIB cut about 20% of its workforce from 2014 to last year, and its liabilities are $19 million larger than its assets, according to its latest tax filings with the IRS. Its membership, which topped 600,000 during the group’s most muscular era about 15 years ago, is estimated to have fallen to half that number.

The association’s pension plan had liabilities of $83.9 million and assets of $69.3 million in 2017, The Washington Times has learned. The group’s program revenue dipped in 2017 to its lowest level in a decade before bouncing back last year to $89 million.

Some Republicans no longer consider the NFIB to be the foremost guide for business legislation. In the 1990s, the group was the cardinal source on “key” votes for Republican lawmakers and created a name for itself by leading the fight against then-first lady Hillary Clinton’s health care proposal.

“It’s like the Ottoman Empire,” one Republican strategist and former House staffer said. “They once were powerful, but now they’re unseen and unknown.”

Several Republican lawmakers said that in the era of rapidly expanding social media and newer advocacy groups targeting specific issues, there are simply many more voices competing for their time and attention on a variety of issues.

“I think there are just so many more groups these days,” said Rep. Adrian Smith, Nebraska Republican and a member of the House Ways and Means Committee. “The higher-velocity exchange of information with technology, that’s probably what’s changed the most, more than any particular group has changed its position or their strategy.”

Similar changes in the lobbying landscape have hit the U.S. Chamber of Commerce, the nation’s largest business association, which announced a shake-up last week of its top leadership. Longtime CEO and President Thomas J. Donohue, 81, is giving up the presidency immediately and said he will step down as CEO in 2022 amid reports of declining revenue, lost donors, waning influence and clashes with the Trump administration.

President Trump criticized the Chamber of Commerce again Monday after a top official, Myron Brilliant, complained that the administration was wrong to use the “weaponization of tariffs” against Mexico as a negotiating tool over border security.

“I’m a member of the U.S. Chamber,” Mr. Trump said on CNBC. “Maybe I’ll have to rethink that, because when you look at it, the chamber is probably more for the companies and the people that are members than they are for our country.”

At NFIB, salaries ate up 74% of program revenue in 2018, a relatively high amount for an association. At the National Association of Manufacturers, salaries accounted for 64% of program revenue in 2017. The American Hospital Association’s salaries amounted to 48% of program revenue in 2017.

NFIB President and CEO Juanita Duggan received a base salary of $708,000 and total compensation of $1.2 million last year — although that is far less than the heads of some other business associations. Mr. Donohue earned $6.6 million at the Chamber of Commerce in 2017, and Business Roundtable CEO John Engler reportedly had earnings of $2.4 million in 2016.

The NFIB received about $1.5 million in 2012 from Freedom Partners Chamber of Commerce, an advocacy group affiliated with billionaire industrialist Charles Koch, who has since reevaluated and pulled back much of his political spending.

When Newt Gingrich took over the House speakership with a new Republican majority in 1995, the GOP strategist said of the NFIB, “they were the organization that helped to drive the Republicans to the majority.”

“With the Contract for America, they were huge,” he said. “Now, they just don’t have the clout. I don’t know what they do.”

Former Rep. Bob Barr, a Georgia Republican who served in the House from 1995 to 2003, said the NFIB was “a major player, both at the grassroots level here in my district as well as in Washington.”

“They were very good at getting their individual members involved, both in terms of coming to events, providing information and making donations,” he said.

But Mr. Barr, who now practices law in Georgia, said he was having a conversation recently with someone about small business issues and wondered aloud, “Whatever happened to the NFIB? I don’t really hear about them anymore. It’s a mystery to me.”

In a statement, the NFIB didn’t address questions about its finances or membership. The association, with headquarters in Nashville, Tennessee, said it is “the strong, influential, and highly effective voice in Washington and in statehouses for America’s small businesses.”

“NFIB has led the fight in the most significant debates affecting small businesses in recent years in Washington and all state capitols,” the group said. “NFIB mounted historic opposition to the nomination of Merrick Garland to the Supreme Court [in 2016], which paved the way for Justices Gorsuch and Kavanaugh; achieved significant victories against harmful regulations in the courts, in agencies, and on Capitol Hill; and wielded significant influence in the electoral process with our much sought-after endorsements and grassroots activism.”

NFIB also pointed to its “vocal opposition to the initial corporate-only tax reform proposal in Congress” in 2017, saying its objections led to the enactment of a tax deduction that will save small businesses $414 billion through 2027.

The “pass-through” deduction allows most small business owners to deduct 20% of their share of business income, up to $315,000 in 2018 for those filing jointly.

When House Republicans introduced the legislation in 2017, NFIB startled many in Congress and the White House by announcing its opposition publicly. It said the measure would “leave many small businesses behind.”

Among other groups raising objections with the NFIB were the National Association of Home Builders and the Associated General Contractors of America. The initial bill included a special tax rate for the income of the highest-earning pass-through businesses, but not for low- and middle-income small-business owners.

After discussions with NFIB officials, then-Ways and Means Committee Chairman Kevin Brady, Texas Republican, amended the proposal to expand the tax cuts for lower-income small business owners.

A source close to the White House said the NFIB’s initial move opposing the bill publicly angered many in the administration.

“They wanted some provisions that were inconsistent with our goal for the plan,” said the person familiar with the White House’s thinking. “Our feeling was they were endangering one of the most pro-business tax cuts in American history. They couldn’t see the forest for the trees. It wasn’t something we felt was very substantive. We were aghast.”

This person said of the NFIB, “It is true that they’ve lost a lot of clout, both inside and outside the White House in Washington. Increasingly, their voice is ineffective.”

Senate Republicans later proposed a tax deduction instead of a special rate for income from pass-through businesses. The Senate version was adopted with adjustments, and the NFIB supported the overall bill, saying the Senate’s approach was simpler.

The Republican strategist said of the NFIB’s role in the debate, “They weren’t driving something; they were complaining about something. They were trying to stop something, and they looked kind of toothless. Instead of defining the terms of the debate, they got run over and bought off.”

But Rep. Tom Reed of New York, another Republican on the Ways and Means Committee, said the NFIB was “at the table” during key negotiations.

“Their input was vital to getting the final needles dialed in,” he said in an interview.

He added, “It was others, too. It was a lot of voices at that time, especially toward the end.”

Mr. Reed said of the NFIB, “They still have a pretty loud voice, and they’re well-respected because they have a voice of the hearts of many of our districts.”

“In this day and age of 24/7 news cycle social media, there are multiple vectors coming in to members’ offices that maybe aren’t sharing that voice,” he said. “But from my perspective, the louder the voices from the collective pulpit that they represent of small business in America, that’s good. It’s something you can’t ignore.”

At a White House event marking six months since the enactment of the tax cut law, Mr. Trump recognized Ms. Duggan and three other association and think tank leaders for helping the administration enact the tax relief.

“Your support has been incredible in getting this very difficult legislation to the finish line and passed,” Mr. Trump said in June 2018. “Great team.”

A retired House Republican lawmaker who served during the tax cut fight said the NFIB has been “a lot lower profile in recent years,” and he believes it’s mainly because Republicans have controlled most of the levers of power in Washington.

“Right now, for the Chamber of Commerce and the NFIB, in many ways the Trump presidency has been friendly to them, at least on tax and regulatory matters,” the retired lawmaker said. “If the Democrats take all the levers of power, then the NFIB comes roaring back, as does the chamber. When you’re out of power, your members are angry and more inclined to be supportive and give money.”

The group’s unexpected initial stance against the tax cut bill summarized, for NFIB critics, how much has changed since the association helped drive the conservative agenda.

Another former Republican congressional staffer who works on K Street believes the Democrats’ takeover of the House in 2006 “had a significant impact on their operations.”

“I think they were just considered irrelevant after that on the Hill, they never fully made a recovery,” he said. “I haven’t dealt with them in years, and I haven’t heard them looking to build muscle when we’re dealing with diverse issues on small businesses. NFIB no longer jumps to the immediate forefront.”

Some in Congress say the group still has an important presence.

“By supporting pro-growth policies, the National Federation of Independent Business has been a key ally for building a strong economy where small businesses are thriving,” said Sen. Patrick J. Toomey, Pennsylvania Republican and a member of the Senate Finance Committee. “I am confident NFIB will continue to be one of the preeminent voices for small businesses at the local, state, and federal level.”

The lobbying landscape in Washington has changed, too, as more specialized, issue-specific advocacy groups and political action committees compete with established associations such as the NFIB and the Chamber of Commerce. The Wall Street Journal reported recently that the chamber has slipped in revenue and large donors while spending less on elections.

The chamber announced last week that it will begin a “global search” for its next CEO to replace Mr. Donohue in 2022.

Senior Executive Vice President Suzanne Clark is also being promoted to president, “having successfully led the cultural transformation of the chamber over the last 5 years,” the group said.

• Dave Boyer can be reached at dboyer@washingtontimes.com.

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