Small Business Lobbyists Fight Big Business Over Tax Rates

Photograph by Paul McCormick

Two business lobbies that normally see eye-to-eye on such issues as taxes and regulation are butting heads. The Business Roundtable, a group of executives at multinational companies, urged (pdf) fiscal cliff negotiators this week to make a deal that includes both spending cuts and more tax revenue, showing a willingness to accept higher tax rates for the wealthiest Americans in exchange for a shot at corporate tax reform.

The idea irritated a conservative small business lobby. “It’s easy for corporate CEOs to say that individual tax rates ought to be raised,” Dan Danner, president of the National Federation of Independent Business, said in a press release Wednesday. “Their companies don’t pay taxes at the individual rate.”

What followed is familiar obfuscation. Some Republicans argue that allowing the Bush tax cuts to expire for income over $250,000 is tantamount to plundering Main Street. The Hill has the details:

After the Business Roundtable, a lobby group for CEOs, gave its blessing to higher individual rates this week, Republicans explicitly made the case that the White House had chosen corporate America over Main Street.

“What kind of message does this send to every mom-and-pop business across America, that the White House is fine with giving corporations a tax cut, while jacking up taxes on the little guys who are the engine of America’s economy?” [Senator Orrin] Hatch added.

It’s true that most small businesses pay taxes at individual tax rates because of the way they are structured. But only about 3 percent of those businesses have enough income to reach the top two brackets, according to the Tax Policy Center.

That means most of the benefit from those tax breaks goes to other high-income taxpayers (including the executives of Business Roundtable companies). Letting them expire would hit some small businesses, but most of the new revenue would come from other wealthy people. The NFIB painting higher taxes on top-earners as a burden primarily on small businesses is inaccurate. When I asked NFIB spokesman Kevan Chapman if the group saw any room for reducing the deficit by changing the corporate or individual tax rates, he wouldn’t answer. “At this point we’re getting into hypotheticals,” he wrote in an email. The group’s main concern is “a very real and substantial negative impact to raising taxes on small businesses paying individual rates.”

In response to the NFIB’s remarks, Business Roundtable spokeswoman Amanda DeBard says Washington needs to find a deal that will avoid the fiscal cliff’s tax hikes and spending cuts before New Year’s Day and then tackle comprehensive tax reform in 2013. “To reach a compromise we will all need to give a little,” she wrote in an e-mail. “We have to have that compromise, that action, by the end of the year to prevent the serious economic harm that affect all businesses, all employees, and the entire nation.”

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