GOP pits small business vs. corporate CEOs in tax fight

Top Republican lawmakers are pitting small businesses against big corporations in their push to keep individual tax rate increases out of any “fiscal cliff” deal.

Republican tax-writers lashed out in recent days at both the White House, for pushing corporate tax reform in a deal, and at chief executives, for saying they could get onboard with tax-rate hikes.

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“I get it — these big-time CEOs, trying to compete in an increasingly competitive global economy, want corporate tax reform,” Sen. Orrin Hatch (Utah), the ranking Republican on the Senate Finance Committee, said in a Wednesday statement. “I want that, too. But to advocate raising taxes on Main Street businesses in exchange is nonsensical.”

Congressional Republicans have long stressed that individual tax rate hikes would hurt small businesses — so-called pass-through entities — that pay taxes through the individual code. For that reason, GOP lawmakers have said that individual and corporate tax reform should be done in tandem.

But the stridently populist message from Hatch and other top Republicans, including House Ways and Means Committee Chairman Dave Camp (R-Mich.), could pay political dividends for the GOP.

President Obama and other Democrats, confident they have the upper hand in deficit negotiations, have accused Republicans of holding tax cuts for the middle class hostage by insisting that rates for family income over $250,000 a year be extended.

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?” Hatch added.

While top corporate executives would pay more in personal taxes if the Bush-era rates on high income expire, it would not be a blow to their companies’ bottom lines. Many small businesses, on the other hand, would see more of their profits returned to the government.

That underlying dynamic has created a rift between the Roundtable and a key small-business advocate, the National Federation of Independent Business. 

Dan Danner, NFIB’s president, panned the Roundtable’s about-face on higher individual rates in a curt statement: “Easy for you to say.”

Republican tax-writers in the House agreed that the divide between corporations and small businesses on taxes gave them a messaging opportunity.

“If you want to play politics with it, sure,” said Rep. Patrick Tiberi (Ohio), the top Republican on the Ways and Means subcommittee dealing with taxes. “It absolutely is.”

But the GOP lawmakers also said the White House had intentionally tried to create the rift, and suggested that the corporate executives might have had some regrets about their new stance.

“I’m not sure all the business executives understood exactly how they were weighing in politically,” Rep. Kevin Brady (Texas) said. “They created, my guess is unintentionally, the perception that they were willing to sacrifice small businesses to higher tax rates. And I don’t think they realized they make comprehensive reform more difficult.”

Matt Turkstra, NFIB’s manager for legislative affairs, told The Hill that it was natural for corporations and small businesses to have different desires when it comes to the tax code. 

“A lot of the people out there advocating for higher rates on individuals and pass-throughs are also advocating for lower corporate rates,” Turkstra said. 

“They do and would care about the corporate code,” he added. “We do and should care about the individual code.”

But Turkstra noted that, even in the letter this week when they sounded open to individual rate increases, the Roundtable also specifically called for “comprehensive and meaningful” tax reform.

Corporate executives on Wednesday tried to throw cold water on the idea that they were happy to sacrifice smaller companies for their own gain. 

“The last thing we’re trying to do with the letter is put headwinds in front of any business,” said Jim McNerney, the Roundtable chairman and chief executive of Boeing. “Small and big business are not mortal enemies.”

But while McNerney stressed that no one constituency — like small businesses — should bear the brunt of any deficit deal, the Boeing chief also said that many groups would have to compromise.

“Elements in my constituency are very unhappy that we even want to mention revenues or taxes as part of it,” he said. “Everyone has to feel like they’re getting nailed. Then we know we have a deal.”

Camp responded to the Roundtable’s statements this week by saying that “big business may support raising tax rates on small businesses, but I do not.”

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The Roundtable had backed a Republican plan this summer to extend all current tax policy for a year, and only backed away from that this week — with the fiscal cliff just three weeks away.

A Republican aide noted that, unlike others, the party had been consistent with its tax prescriptions.

“The GOP has been calling for comprehensive tax reform for some time and has even passed legislation in the House that reinforces our commitment to achieving that goal next year,” the aide said.

NFIB officials say they are more concerned that the Obama administration has yet to acknowledge that individual rate increases will hurt their membership than with any difference of opinion with corporations. 

“I think they’re taking every political advantage they can possibly take,” Hatch said of the administration. “I give them credit for being so vicious politically — if you can give credit for that.”