Business groups prepare blitz against Democratic tax hikes

The U.S. Capitol is seen on July 1
Greg Nash

Business groups, which celebrated the bipartisan $1 trillion infrastructure bill passed by the Senate on Tuesday, are preparing to aggressively lobby against Democrats’ broader $3.5 trillion spending package even as House leaders say they will not pass one bill without the other.

The bipartisan plan invests $550 billion in new infrastructure spending without hiking taxes. But the larger, party-line plan to fund a wide range of Democratic priorities from climate to child care is funded primarily by increasing taxes on the wealthiest individuals and corporations.

Business groups and lobbyists representing business interests are prepared to fiercely oppose such tax increases, confident that Democrats’ reconciliation package will inevitably be watered down or collapse entirely amid divisions within the caucus.

“Today, the $3.5 trillion reconciliation bill does not have 218 votes in the House or 51 votes in the Senate, and we’re going to make sure it stays that way,” said Neil Bradley, executive vice president and chief policy officer of the U.S. Chamber of Commerce, which backed the bipartisan infrastructure bill.

Every Senate Democrat on Wednesday voted to advance Democrats’ budget resolution, which serves as a framework for the reconciliation package. But Sens. Joe Manchin (D-W.Va.) and Kyrsten Sinema (D-Ariz.) have already indicated that they want to cut the size of the final bill.

Just one Democratic defection in the Senate would kill the bill, as would four defections in the House.

Some moderate House Democrats have expressed reservations about the $3.5 trillion bill, pitting them against progressives who are demanding huge investments to fight climate change.

Democrats must find common ground soon to accommodate a packed upcoming schedule that includes votes on annual spending bills and the debt ceiling.

Omar Franco, head of Becker & Poliakoff’s federal lobbying practice, said some business groups and GOP lawmakers considered those factors before throwing their support behind the bipartisan deal, knowing that the reconciliation bill could easily unravel.

“They’re threading the needle,” Franco said of congressional Democrats. “There’s no room for error right now, and this is a process that is very error prone.”

House Speaker Nancy Pelosi (D-Calif.) has vowed that she will not take up the bipartisan infrastructure bill until the Senate passes the party-line reconciliation package. President Biden has been less committal, and some moderate House Democrats have urged Pelosi to pass the bipartisan bill without delay.

“Since I don’t believe there are 50 votes in the Senate to raise taxes right now, I think President Biden, who very much wants and needs a bipartisan win right now, will ultimately prevail against Pelosi and the progressives if they try to hold up the bipartisan package,” said Alex Vogel, CEO of lobbying firm The Vogel Group and a former Senate GOP aide.

The largest business groups, including the Chamber, National Association of Manufacturers and the Business Roundtable, praised the bipartisan infrastructure bill Tuesday as it passed the Senate and urged the House to swiftly vote on the spending package.

If the bipartisan bill passes in a standalone vote, lobbyists argue they will have more leverage to sway moderate Democrats away from the reconciliation package. They’re targeting House lawmakers who face difficult reelection battles in 2022 as well as Manchin, who has said that he “can’t really guarantee anybody” that the massive spending plan will pass.

“It’s no secret that tax increases were coming whether or not Republicans supported the infrastructure bill, so there has been plenty of time for the business community to mobilize, especially in moderate House districts,” said Jonathan Slemrod, a lobbyist at Harbinger Strategies and a former Trump administration and Senate GOP staffer.

If they cannot outright defeat the reconciliation bill, business lobbyists will push Democrats to reduce the size of the package and water down corporate tax increases. 

Biden initially asked Congress to raise the corporate tax rate from 21 to 28 percent. But he and Manchin said they would accept a tax rate of 25 percent, which is significantly lower than the 35 percent rate that remained in place until Republicans enacted tax cuts in 2017. 

“Our biggest concern right now is with respect to the size of the tax increase they want to put on the economy,” said Rachelle Bernstein, vice president and tax counsel at the National Retail Federation. “We think the economy is too weak and in too uncertain a position. Many retailers are very nervous about future closures and a lack of sales.”

Democrats have dismissed expected pushback on tax hikes, noting that the plan does not raise taxes on families making under $400,000 annually or on small businesses.

“At a time of massive income and wealth inequality this is a budget that will end the days of billionaires and large, profitable corporations not paying a nickel in federal income taxes,” Senate Budget Committee Chairman Bernie Sanders (I-Vt.) said in a statement Monday.

The specifics of tax changes will be mostly worked out by the Senate Finance Committee, which is chaired by Sen. Ron Wyden (D-Ore.). In a statement Monday, Wyden said his panel is considering “a menu of options,” including increased taxes on multinational corporations that do business outside of the U.S.

The infrastructure debate has set off a lobbying boom in Washington, D.C. This year’s second-quarter lobbying spending totaled more than $880 million, up from $851 million during the same period in 2020, according to campaign finance watchdog OpenSecrets.

More than 2,000 companies and organizations reported spending to influence the infrastructure debate, The Washington Post reported, citing OpenSecrets. That’s up from 1,300 last year.

Tags Bernie Sanders Joe Biden Joe Manchin Kyrsten Sinema Nancy Pelosi Ron Wyden

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