8 Minutes to Read (Reuters) – WASHINGTON (Reuters) – Business lobbying groups in the United States applauded a bipartisan $1.2 trillion infrastructure deal, but are preparing to oppose corporate tax rises coming in a separate but related spending measure that Democrats hope to pass without Republican support. PHOTO FROM THE FILE: The word “taxes” is etched at the Internal Revenue Service (IRS) headquarters in Washington, D.C., United States, on May 10, 2021. REUTERS/Andrew Kelly/File Photo REUTERS/Andrew Kelly/File Photo The US Chamber of Commerce, the National Association of Manufacturers, the National Retail Federation, and other well-funded lobbying groups plan to deploy the same argument they used in 2017 to convince Republicans to give them massive tax cuts: higher corporate taxes equal fewer employment. “We have no idea what’s in that package,” Rachelle Bernstein, the retail group’s chief tax counsel, said of the Democrats’ “reconciliation” bill, which is expected to include extra social spending and tax increases. “However, we do not believe it is appropriate to use a business tax increase to fund spending,” said Bernstein, whose group spent $1.5 million on lobbying in the first quarter of 2021, according to transparency watchdog OpenSecrets.org. To pay for $4 trillion in new spending on transportation, communications, research, renewable energy, childcare, housing, education, and healthcare, the Biden administration’s pitch for reducing economic inequality and competing more effectively with China relies on tax hikes on corporations and wealthy Americans. Treasury Secretary Janet Yellen made her case to the US Chamber of Commerce in May, arguing that such productivity-enhancing investments, paid for in part by a corporation tax rise from 21% to 28%, would nevertheless enhance earnings. Last week, the International Monetary Fund predicted that such investments will fuel U.S. development for years, and factored them into a new 7 percent GDP growth prediction for 2021, the highest since 1984. At a G20 finance summit this week in Venice, Italy, Yellen is anticipated to declare that firms around the world need to pay more for government spending, with payments enforced by a global minimum tax that neutralizes tax havens. According to lobbying group officials, whether U.S. firms will be pushed to pay more at home will likely come down to a struggle for the hearts and minds of a handful of moderate Democrats in both the House and the Senate. MANCHIN, LOBBYING FOCUS ON SINEMA These corporate groups had hoped that the bipartisan infrastructure measure and the political tax and spending bill would be debated separately, making it easier to kill the latter. According to Jon Lieber, U.S. managing director of the Eurasia Group political risk consultancy and a former economic adviser to Senate Republican Leader Mitch McConnell, House Speaker Nancy Pelosi “blew that up” by insisting that the two bills pass in tandem. According to Lieber, this raises the possibility that infrastructure investment will become a contentious issue requiring the support of every Democrat in the Senate, as well as all but a few House Democrats. Business lobbyists are concentrating their efforts on persuading Democratic senators Joe Manchin of West Virginia, Kyrsten Sinema of Arizona, and a few Democratic House members that tax rises will harm small businesses that are still recovering from the pandemic. Tom Spulak, co-leader of King and Spalding’s government lobbying and public policy practice, said, “I’m going to target 10 or 20 of the most vulnerable House Democrats.” “I’m going to go into those districts and say, first and first, this is a horrible deal, and second, Democrats have dealt in bad faith,” he added, alluding to Democrats promising to keep tax hikes out of the infrastructure package while pushing for partisan tax hikes. America’s Job Creators for a Strong Recovery, a new coalition of 28 industry groups, is running ads in Arizona’s swing state to convince voters in favor of Sinema and fellow Senate Democrat Mark Kelly. “This may not be the ideal time, in most people’s minds, to start slapping tax increases on businesses that are just coming back from the epidemic,” said Jade West, chief government relations officer for the National Association of Wholesaler-Distributors in Washington, which organized the group. According to here, half of the coalition’s member organisations spent $3 million on lobbying in the first three months of 2021. OpenSecrets.org. RESEARCH CONFIRMS… Lobbying and pro-business organizations are releasing research that refutes the Biden administration’s claims that the tax and spending policies will result in millions of new jobs. According to the Tax Foundation, a pro-business think tank, the “American Jobs Plan,” which includes both infrastructure and corporation tax hikes, would result in a net long-term GDP decrease of 0.5 percent and 101,000 fewer jobs in the United States. Even if 75% of the tax rise funds productivity-enhancing public initiatives, according to a National Retail Federation-funded analysis here by accounting firm EY, U.S. GDP will be cut by $72 billion annually. According to EY, the reduction in labor income translates to a 700,000 job loss across the economy. A new perspective is shown through independent research. While business investment would fall by 1% by the end of 2023, public investments would add 2 million jobs by the end of 2024, and long-term potential production growth would be 0.1 percent higher than baseline expectations after a decade, according to Oxford Economics. CORPORATIONS, TAX RICH, POLLS Corporate tax income has declined as a source of federal funding in the United States, from about 40% in the 1940s to less than 7% now, thanks to Republican tax legislation passed in 2017 that reduced the headline corporate tax rate to 21% from a long-term high of 35%. Even if the U.S. corporate tax rate were raised to 28 percent, as proposed by President Joe Biden, the largest U.S. companies would still pay a lower effective tax rate than their overseas competitors — around 21 percent — thanks to generous deductions and credits in the U.S. tax code, according to a Reuters analysis of 2020 tax data published this month. Recent polls show that raising taxes on firms and the affluent executives who control them to pay for government spending is overwhelmingly politically popular. In a June poll conducted by the left-leaning Americans for Tax Fairness, 69 percent of voters supported raising taxes on the affluent and businesses, with 68 percent of independent voters agreeing. The poll indicated that 55 percent of rural people supported hiking the corporate tax rate to 28 percent, while 58 percent supported raising taxes on Americans earning more than $400,000 per year, a source of strength for Republicans. “The American public is not on the side of the companies here,” the group’s executive director, Frank Clemente, said. “They want Biden’s $4 trillion spending proposal paid for by raising taxes on the wealthy and corporations. They don’t want it to be paid for by raising the debt ceiling.” According to a study conducted by Reuters/Ipsos in the United States, 65 percent of Americans favor increased taxes on the rich, and the majority believe that “trickle down economics has never worked in America.” David Lawder contributed reporting, while Heather Timmons and Andrea Ricci edited the piece./n
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