Washington business groups worry that debt-ceiling deal will raise taxes too

Business groups in Washington are worried that a deal to increase the debt ceiling will also raise taxes.

While industry groups are aligned with Obama on the need to lift the debt limit, there’s a growing fear that new tax revenue will be considered as lawmakers look to build upon the deficit cuts in the “fiscal cliff” agreement.

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“Our first thought is it’s better for business that the debt ceiling gets raised,” said Jay Perron, vice president of government affairs and public policy for the International Franchise Association. “We are afraid that in some sort of overall deal that they may find a way to raise tax rates again. We want to make sure that they are done with tax increases.”

The fiscal-cliff deal that passed Congress last week raised income tax rates on annual individual income above $400,000 and family income above $450,000. Despite Obama’s demands, the agreement did not include an increase to the debt ceiling, which now must be raised sometime between mid-February and early March to prevent a federal default.

GOP leaders say they are through approving tax increases, and they are demanding that Obama agree to a dollar of spending cuts for every dollar that Congress adds to the $16.4 trillion spending limit. Spending cuts are coming unless Congress acts, because the agreement only delayed the budget sequester for two months.

The return to debt-ceiling brinkmanship is stoking anxiety in Washington, where memories of the 2011 standoff remain fresh.

“What we have said is we don’t like a manufactured crisis that causes consumer confidence to falter,” said David French, the National Retail Federation’s chief lobbyist. “We need to get past the debt ceiling with a minimum of fireworks.”

But even as business lobbyists call for swift action to increase the $16.4 trillion borrowing cap, they are also pushing back against Democratic calls for new tax revenue in a “balanced” package to cut the deficit.

“The Speaker has made clear and his caucus has made clear to him that something needs to be done on spending,” said Jade West, senior vice president of government relations for the National Association of Wholesaler-Distributors. “There has got to be some point where the rubber meets the road on spending. The debt limit is it.”

Both parties are courting support from the business world as they gear up for another clash over the deficit. Some industry groups told The Hill they are trying to lie low for now.

 “An everyday, small-business guy is not thinking about the debt ceiling as of today. He’s probably thinking about doing payroll on the 15th with this new payroll tax increase,” Perron said. “As we get closer, we will definitely be asking them [lawmakers] to increase the debt ceiling.”

The White House has sought to build business support for a “clean” increase that isn’t tied to other fiscal measures. Obama last month visited the Business Roundtable, the powerful lobby arm for corporate executives, to stake out his position.

“If Congress in any way suggests that they’re going to tie negotiations to debt-ceiling votes and take us to the brink of default once again as part of a budget negotiation … I will not play that game,” Obama said.

That stance has angered some in the trade-group world who say the president is walking away from his responsibilities.

“Refuse to negotiate? He [Obama] has an obligation to govern, which includes talking to people on the other side of the aisle,” West said. “I want the president to begin talking to Congress about how to avoid a debt-limit crisis. … I do not want Congress to act. I want the president to act to avoid a conflict.”

But Obama’s call for a debt-ceiling increase without drama or delay also echoes the message coming from some of the most influential advocates for business.

“The Chamber believes we should not risk defaulting and therefore the debt ceiling needs to be raised,” said Blair Latoff Holmes, a spokeswoman for the U.S. Chamber of Commerce. “From a market-disruption perspective and for economic certainty, sooner is better than later.”

Manufacturers argue that the “federal government needs to meet its financial obligations and raise the debt limit,” Dorothy Coleman, vice president of tax and domestic economic policy with the National Association of Manufacturers (NAM), told The Hill.

Coleman stressed that NAM will continue to push for Congress to “get its fiscal house in order … in thoughtful and prudent ways” as the nation faces record deficits and debt.

Mostly, manufacturers want more certainty from policymakers after years of careening from one fiscal emergency to the next.

“The more certainty you can provide to business, the more job creation you’re going to see,” Coleman said.