Business groups target moderate Democrats on Biden tax plans

Business groups are gearing up to make the case against President Biden’s proposed tax increases, with lobbyists increasingly focusing their attention on moderate Democrats.

Congressional Republicans are expected to uniformly oppose Biden’s plan to raise taxes on corporations and wealthy individuals to finance his economic recovery packages. That’s freed up K Street opponents to focus on Democrats, who have razor-thin majorities in the House and Senate.

Groups like the U.S. Chamber of Commerce are targeting pro-business moderate Democrats in hopes of steering the conversation away from corporate taxes as a way to pay for infrastructure spending.

“We’re talking to any member we can talk to. But in particular, we’re talking to the members who have expressed their concern about American competitiveness and about jobs. It’s really a lot of the members that we worked with in the last Congress,” said Neil Bradley, the Chamber’s chief policy officer.

Biden has proposed increasing the corporate tax rate from 21 percent to 28 percent. He’s also called for raising taxes on high-income individuals in several ways, including through higher top rates for both wage income and capital gains.

“Our conversations with Democrats, it’s really emphasizing that it is not as simple as maybe it often appears in terms of the impact. When you, for example, talk about the corporate rate, simply suggesting that, well, it was 35 [percent] and now it’s 21, and so someplace in the middle ignores kind of all of the base broadeners and ignores the international competitiveness issue,” Bradley said.

Bradley added that Democrats have been open to these conversations, which have involved the Chamber as well as some of their member companies.

“We’re finding members of Congress are receiving those messages and are open to hearing them. It’s also true that members want to get an infrastructure bill done, so often the conversation turns to, ‘OK, but how can we still move forward with infrastructure?’ ” he said.

In the past month, the Chamber has had 45 meetings with congressional offices on taxes in the infrastructure package and has 20 more meetings scheduled over the next few weeks with both Democratic and Republican offices.

The Business Roundtable held nearly 70 meetings with congressional offices in April and launched a digital and radio advertising push in the Washington, D.C., area to tout the benefits of the existing tax system.

“The current U.S. tax system has generated strong economic returns for our country, from historically low unemployment to higher wages for American workers. The Roundtable remains focused on communicating the positive impacts of a competitive tax system and why corporate tax increases would weaken economic recovery, job creation and long-term growth in America,” said Jessica Boulanger, a spokeswoman for Business Roundtable.

Instead of raising the corporate tax rate, the Chamber is among the business groups that support a view shared by the centrist Problem Solvers Caucus that a gas tax increase could pay for infrastructure measures. The Chamber also backs a GOP infrastructure counterproposal spearheaded by Sen. Shelley Moore Capito (R-W.Va.) that would cost $568 billion, a fraction of Biden’s $2.3 trillion plan.

But administration officials have not indicated they’re willing to embrace either of those approaches. 

Transportation Secretary Pete Buttigieg was asked Tuesday if he could envision a bill without raising the corporate tax rate.

“The president said if other people have ideas of how to pay for this, they should bring them forward and we will hear them,” Buttigieg told Punchbowl News.

Sen. Joe Manchin (D-W.Va.), a prominent centrist senator, has said he’d prefer the corporate tax rate be increased to 25 percent, rather than 28 percent. Manchin has also expressed opposition to raising the federal gas tax.

In addition to business groups pushing back on Biden’s tax proposals, conservative groups are also mobilizing against the administration’s tax plans.

Grover Norquist, president of the anti-tax group Americans for Tax Reform, said his group has been conducting polling to gauge which parts of Biden’s proposals are most popular and what components are politically vulnerable. He said the goal is to pressure Democratic senators who live in Republican-leaning states and swing states on taxes.

Norquist said he thinks that there are already signs that Biden won’t be able to get everything he wants on taxes, with some centrist Democrats already wary of a 28 percent corporate tax rate.

“We’re already seeing the collapsing position of the president,” he argued.

Americans for Prosperity, which was co-founded by GOP mega-donor Charles Koch, is holding events in both Democratic- and Republican-held House districts to raise concerns about Biden’s tax and spending proposals. For example, the group recently held an event in the district held by Rep. Cindy Axne (D-Iowa), one of very few Democrats who represents a district that Trump carried in 2020.

Americans for Prosperity President Tim Phillips said that he thinks House Democrats in swing districts are likely to hear concerns about the proposals from their constituents.

“They’re going to have to start paying attention to what their folks are thinking,” he said.

Right-leaning think tanks, such as the Heritage Foundation, have been releasing analyses that are critical of Biden’s plans, and are expected to produce further papers once Congress releases legislative text based on Biden’s proposals.

“We’ll be doing analysis, we’ll be helping people understand what the impact will be,” said Matthew Dickerson, director of Heritage’s Grover M. Hermann Center for the Federal Budget. Dickerson released a report last week that argued that “increasing taxes on businesses hurts real people.”

Administration officials have been aggressively defending the president’s proposals. The White House on Tuesday issued a release highlighting a New York Times newsletter that reported Biden’s proposed tax increases would not raise taxes on the rich to historically high levels.

An administration official told The Hill that Biden wants corporations to pay their fair share of taxes so that the U.S. can make investments in the middle class and boost the economy, and that corporations can afford to pay more.

During a virtual event hosted by Politico on Tuesday, White House economic adviser Jared Bernstein said he doesn’t think the higher capital gains taxes would reduce investment in the economy, while Treasury Secretary Janet Yellen argued at a virtual event hosted by The Atlantic that after former President Trump’s 2017 tax law was enacted, stock buybacks increased and workers didn’t see significant wage increases.

“A lot of investment is not impacted by taxes,” Yellen said. “We’ve exempted some of the normal return to investment from heavy taxation. And raising taxes mainly hits the extraordinary return to capital, which seems to have very little impact on investment.”