GOP to business: Don't let Obama divide you

By Bernie Becker - 12/14/12 07:32 PM ET

Top Republicans on Friday accused President Obama of trying to create a rift over taxes among the business community, and urged corporations and smaller companies alike to embrace a comprehensive revamp of the tax code.

Rep. Dave Camp (R-Mich.), the chairman of the House Ways and Means Committee, and Sen. Orrin Hatch (Utah), the top Republican on the Finance Committee, implored key business lobbies not to get behind the White House’s push for corporate tax reform.

Obama has floated a corporate-only revamp as part of negotiations over year-end “fiscal cliff” negotiations, at the same time he has gotten some support from corporate executives for higher rates on the highest earners.

But as Camp and Hatch noted, many small business owners – of so-called pass-throughs – pay taxes through the individual code, and could be left behind if tax rates increase and the individual code isn’t reformed.

“The president’s latest gambit is clearly meant to divide the business community on the issue of tax reform,” Camp and Hatch wrote in a letter to Jim McNerney, the chairman of the Business Roundtable, and Dan Danner, the president of the National Federation of Independent Business.

The Obama administration has long put more of an emphasis on reforming the corporate code, and released a proposed framework for doing so in February.

Members of the Roundtable, a lobby for corporate CEOs, said this week that tax rate increases would need to be part of a tax-and-spending deal, a sudden break from their past stance that all current tax policies should be extended to give Washington time to overhaul the tax system.

Key Republicans – like Camp and Hatch – pushed back on those statements, while also trying to use them to their political advantage.

Obama and Democrats have tried to cast Republicans as beholden to the wealthy in the “fiscal cliff” debate, because of the GOP’s opposition to tax rate increases. But in populist tones, Hatch said this week’s events underscored that Republicans were on the side of small business, while the administration favored corporate America.

In Friday’s letter, Camp and Hatch also warned corporate executives that they could be jeopardizing key priorities like shielding foreign profits from taxation by teaming up with the White House.

“In endorsing the president’s push for higher tax rates, you are also risking some of your won priorities for tax reform – such as shifting from a worldwide to a territorial system and bringing our corporate rate in line with the OECD average” they wrote.

Republicans have also expressed concern about creating disparities between corporate and individual rates, with both now topping out at 35 percent. Obama has called for raising the top individual rate to 39.6 percent, while both Democrats and Republicans want to lower the corporate tax rate.

“Reforming some portions of the tax code but ignoring others will not only leave the code entangled with provisions that restrict businesses, but will leave out a huge sector of job creators, threatening to further hamper our small recovery,” Camp and Hatch wrote Friday.

The Roundtable has said that it is still committed to a comprehensive rewrite of the code.

But the NFIB, a key small business lobby, has said that it’s easy for corporate executives to get on board with a tax rate increase that – unlike for small businesses – would hurt their personal bottom line but not their company’s.

NFIB officials have also said that pass-throughs also use some of the same tax breaks that would be on the table to help pay for a reduction of corporate tax rates, putting them at even more of a disadvantage.

Some Democrats still want a comprehensive tax reform, while others believe that, given the global competition, the corporate code needs assistance first. Meanwhile, Sen. Carl Levin (D-Mich.) is among those pushing hard against a territorial system, which would protect most or all of a corporation’s offshore profits from U.S. taxation.