Biz groups 'disappointed' with GOP on tax reform

Biz groups 'disappointed' with GOP on tax reform
© Greg Nash

It’s fair to say the business community isn’t thrilled by the latest GOP efforts to spur progress on tax reform.

Senate Finance Chairman Orrin HatchOrrin Grant HatchKey Republicans say Biden can break Washington gridlock Trump awards Medal of Freedom to racing industry icon Roger Penske Trump holds more Medal of Freedom ceremonies than predecessors but awards fewer medals MORE (R-Utah) and House Ways and Means Chairman Paul RyanPaul Davis RyanHouse Ethics Committee informs Duncan Hunter he can no longer vote after guilty plea Duncan Hunter pleads guilty after changing plea Trump campaign steps up attacks on Biden MORE (R-Wis.) reached out to business groups this week, saying they were searching for ways to help all businesses in tax reform even though President Obama is opposed to reducing tax rates for many companies.

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On Wednesday, the business groups responded that there’s no way tax reform works without reducing tax rates across-the-board, and that Ryan and Hatch should already be fully aware of how they feel.

“We believe that we have clearly and consistently communicated this position to you and your staffs and we reiterate it here,” the eight groups, part of the Coalition for Fair Effective Tax Rates, told Hatch and Ryan.

The groups on the letter include the National Federation of Independent Business, the Retail Industry Leaders Association, the International Franchise Association and the National Association of Wholesaler-Distributors.

The back-and-forth underscores the challenges facing would-be tax reformers, and suggests the debate could be causing splits between even traditional allies like Republicans and the business community. Obama and the GOP have said they believe that they can find common ground on business tax reform.

But Obama and other Democrats are dead-set against reducing the top individual tax rate of 39.6 percent, even as leaders in both parties want to reduce the corporate tax rate from 35 percent down into the 20s.

Many companies – known as pass-through entities – pay taxes as individuals, and business groups have openly worried that tax reform would leave them with a much higher rate than corporations, while also taking away tax incentives they use.

Ryan and Hatch have acknowledged that differences between the two parties make tax reform for individuals unlikely until at least 2017. But with time running out on getting business tax reform done before the 2016 election, they reached out to see if the business groups could embrace a tax reform plan that didn’t touch individual rates.

But the business groups clearly don’t even want that idea to be part of the discussion.

“Effective tax rate parity between C corporations and pass-through entities defines true tax reform in our view,” the groups wrote. “Effective tax rate parity cannot be achieved if the tax rate on C corporations is reduced by nearly 30 percent giving them a 15 point advantage over pass-through entities.” 

“The president’s approach to tax reform, seemingly endorsed by your letter, is contrary to the aim of true tax reform and contrary to the mission of this coalition,” the groups added. “Real tax reform means a tax code that no longer picks winners and losers depending on how a business is legally structured or its particular industry.”