US lobby groups write battle plan to beat Biden tax hikes

Washington

US business lobbying groups cheered a bipartisan US$1.2 trillion infrastructure deal, but are gearing up to fight the corporate tax hikes looming in a separate but linked spending bill that Democrats aim to pass without Republican votes.

The US Chamber of Commerce, National Association of Manufacturers, National Retail Federation and other deep-pocketed lobby groups plan to use the same argument they employed in 2017 to secure huge tax cuts from Republicans: higher corporate taxes equal fewer jobs.

"We don't know what's in that package," Rachelle Bernstein, chief tax counsel for the retail group, said of the Democrats' "reconciliation" bill expected to contain new social spending and tax hikes. "But we don't think it is good to use a corporate tax increase to finance spending." Her group has spent US$1.5 million on lobbying in the first quarter of 2021, said watchdog OpenSecrets.org.

The Biden administration's pitch for reducing US economic inequality and competing more effectively with China relies on using tax hikes on corporations and wealthy Americans to pay for some US$4 trillion in new spending on transportation, communications, research, renewable energy, childcare, housing, education and healthcare.

Treasury Secretary Janet Yellen in May laid out to the US Chamber of Commerce her argument that such productivity-enhancing investments, paid for in part with a corporate tax increase to 28 per cent from 21 per cent, would still boost corporate profits.

The International Monetary Fund last week said such investments would stoke US growth for years, and baked their enactment into a new 2021 US gross domestic product (GDP) growth forecast of 7 per cent, the strongest since 1984.

Dr Yellen is expected to say at a G-20 finance meeting in Venice, Italy this week that corporations globally need to pay more for the investments made by governments - payments enforced by a global minimum tax that neutralises tax havens.

Whether US companies will be forced to pay more at home is likely to come down to a battle for the hearts and minds of a handful of moderate Democrats in both the House and the Senate, lobbying group officials told Reuters.

These business groups had hoped for the bipartisan infrastructure bill and partisan tax and spending bill to be considered separately, betting that this would make it easier to kill the latter bill. But House Speaker Nancy Pelosi "blew that up" by insisting that the two bills pass in tandem, said Jon Lieber, US managing director for the Eurasia Group political risk consultancy and a former economic adviser to Senate Republican Leader Mitch McConnell.

He said this increases the likelihood that infrastructure spending turns into a partisan bill that needs the support of every single Democrat in the Senate, and all but a handful of House Democrats.

Business lobbyists are focused on persuading Democratic senators Joe Manchin of West Virginia, Kyrsten Sinema of Arizona and a few Democratic House members that tax hikes will hurt small businesses just emerging from the pandemic.

"I'm going to target 10 or 20 of the most vulnerable House Democrats," said Tom Spulak, co-leader of King and Spalding's government advocacy and public policy practice. "I'm going to go into those districts and say that first of all this is a bad deal, then say that Democrats have dealt in bad faith," he said, referring to Democrats agreeing to leave tax increases out of the infrastructure package, while pursuing partisan tax hikes.

A new coalition of 28 business groups called America's Job Creators for a Strong Recovery is advertising in swing-state Arizona to influence voters to sway Senator Sinema and fellow Senate Democrat Mark Kelly.

"This may not be, in most people's eyes, the right time to start slamming tax increases on businesses that are just coming back from the pandemic," said Jade West, chief government relations officer for the National Association of Wholesaler-Distributors in Washington, the coalition's organiser.

In the first three months of 2021, half of the coalition's member associations spent US$3 million on lobbying, said OpenSecrets.org. REUTERS