Tech lobby ramps up battle against Obama tax proposal

The high-tech industry is planning to amplify its opposition to a tax proposal by the White House.

On June 5, about a half-dozen tech trade associations discussed strategy for stopping a tax hike on multinational corporations, which would come if the Obama administration succeeds in changing a law that allows companies to defer taxes on overseas revenue of their subsidiaries.

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“Is there something we could be saying that is different?” and “Is there a unique role tech could play in this debate?” were two of the questions asked during the June 5 conference call, according to one tech lobbyist who listened in. While the business community has opposed the proposal, tech lobbyists believe their industry in particular would be most affected because of their global operations.

That has led to a lobbying blitz out of Silicon Valley. This week, at least three tech trade associations are flying in executives from their member companies for meetings with lawmakers and White House aides. They will lobby against the proposal in those meetings. The Information Technology Industry Council, TechAmerica and the Semiconductor Industry Association are coordinating the visits.

“It’s going to be raised everywhere,” said another tech lobbyist.

Opponents of the proposal that will change the “deferral” law say Obama’s proposal will lead to more job losses here in the United States and would be a boon to their foreign competitors.

“The issue of deferral is incredibly important to our members. It will be devastating for jobs and will be devastating for stock prices,” said Gary Shapiro, president and CEO of the Consumer Electronics Association. “You can’t impose a huge new tax without expecting that there will be a competitive impact.”

“Deferral is hugely important to us. It will help our competitors and move investment overseas,” said John Greenagel, communications director for the Semiconductor Industry Association.

To battle back, tech lobbyists plan to use a new economic study issued Monday as ammunition.

The report shows that the deferral plan could cost corporations at least 159,000 jobs or $7.3 billion in payments to workers. Under certain conditions, the proposal could end up affecting 2.2 million jobs.

The Technology CEO Council, a trade group for tech industry leaders, commissioned the study. Robert Shapiro, a Clinton administration economist, and Aparna Mathur, of the American Enterprise Institute, put together the study.

The plan to tax the profit U.S. companies generate overseas has already led to some prominent executives threatening to move jobs out of the country.

“It makes U.S. jobs more expensive,” Steve Ballmer, CEO of Microsoft, told Bloomberg reporters last week. “We’re better off taking lots of people and moving them out of the U.S. as opposed to keeping them inside the U.S.”

Ballmer was in Washington last week for a lobbying blitz organized by the Business Software Alliance. Ballmer and nine other tech executives lobbied lawmakers and met with Jason Furman, deputy director of the White House’s National Economic Council, to voice opposition to the tax change.

Ballmer and others from Silicon Valley were vocal supporters of the administration’s $787 billion stimulus package, appreciating that it included funds to build Internet broadband access across the country. The tech industry has also been heartened by Obama’s plan to increase funding for science education as well as his nomination of the first chief technology officer.

It is one reason tech lobbyists are thinking carefully about how publicly they want to oppose the tax plan. Their closeness to the new administration and powerful Democrats on Capitol Hill may help them find open ears among members of the party in power.

“No one is arguing PhRMA should be out in front on this,” said a tech lobbyist, referring to the pharmaceutical manufacturers’ trade association, which has stronger ties to Republicans. “Tech is considered a Democratic industry.”

But despite a good relationship with Democrats, lobbyists for the tech industry have lost similar battles over taxes in the recent past. They unsuccessfully lobbied for a tax break on overseas earnings generated by companies coming back into the United States. They argued that the tax break, called repatriation, would stimulate the economy. Senators tried to attach the repatriation tax break to the stimulus package, but the amendment failed on a 42-55 vote.

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