Businesses aren't fighting to pick up tax-increase tab
Business is usually in the front ranks of President Reagan's constituency. But while the White House leads the charge for tax increases, much of the business community is still back at the fort, wringing its hands.
''Most businessmen will eventually be supporters of this tax bill,'' says a Washington lobbyist who represents many corporations. ''Most CEOs (chief executive officers) are Republican, and they want to support the President in any way they can. But this bill takes a lot of money out of their pockets. They're having a tough time wrestling with their consciences.''
A major exception is the US Chamber of Commerce. Despite a sharp difference of opinion among its leadership, the chamber is sending waves of smooth-talking lobbyists up Capitol Hill in an effort to defeat the tax bill.
''We believe (tax increases) are bad economics and bad politics. We're going all-out to defeat them,'' says Dr. Richard Rahn, the chamber's chief economist.
As of Aug. 12, the House-Senate conference shaping the tax bill had yet to agree on proposed changes in levies on business. But the basic package under discussion -- a Senate-passed bill that would raise $99 billion over the next three years -- would obtain 50 percent of its new revenue from tightening in business taxation, estimates Treasury Secretary Donald Regan.
Measures to increase taxpayer compliance are slated to bring in 30 percent of the bill's revenue, Mr. Regan said at a press conference Aug. 10. Brand-new taxes on individuals and business account for 20 percent.
Provisions of the bill affecting business would reduce some tax write-offs for investment in new plant and equipment. Certain tax preference items, such as tax breaks on depletion of coal and iron ore reserves, would be scaled back. Corporations would have to accelerate their tax payments. Tax breaks for firms involved in long-term contracts would be tightened. The tax advantages of mergers would be reduced; the allowable deduction for business meals would be halved; and so-called safe harbor leasing tax breaks would be restructured.
Business does not like getting stuck with the check for half the tax increases. But the prospect of $140 billion deficits doesn't thrill them either. Many of them thus have ambivalent feelings about the revenue package. Many Washington business lobbyists are therefore having to edge delicately down a very thin line.
''We supported passage of the Finance Committee bill by the Senate, as necessary to keep the tax-increase process moving,'' says James Keogh, executive director of the Business Roundtable. ''But we have serious reservations about some points of the bill. We have not yet taken a final position. We'll wait until the final package.''
The Roundtable, a group representing the cream of the corporate world, particularly objects to changes in depreciation rules, says Mr. Keogh.
A coalition of 16 smaller business groups has sent a joint letter to members of Congress, saying it has reservations about the bill but supports it ''in order to move the budget process further.''
David Miller, a tax lobbyist for the larger National Association of Manufacturers, says ''NAM has not yet made up its mind as to support of the bill. NAM will be supportive of the President's efforts to reduce budget deficits -- an effort which will include selected tax increases.''
The key word, here, is ''selected.'' Business groups are hoping to change the bill if they can, but most probably won't work against the legislation if they can't remove provisions they dislike.
As currently constituted, the tax bill would eliminate scheduled liberalizations of depreciation rules. Many business groups would prefer these coming tax breaks to be postponed, instead of eliminated. Business is also likely to lobby for less drastic changes in safe harbor leasing -- a provision it contends provides much-needed incentive for less profitable firms to invest in new plants and equipment.
The one renegade is the US Chamber of Commerce. Fast becoming one of Washington's most militant trade groups, the chamber is filled with ardent believers in supply-side economics. For them, any kind of tax increase is an anathema.
''We just look at this whole thing as counterproductive,'' says the chamber's Dr. Richard Rahn.
But this week the chamber has been aflurry with internal intrigue. Paul Thayer, chairman of LTV Corporation and chairman of the chamber's board, expressed support for the tax bill in a meeting with President Reagan Aug. 10. He said the chamber's executive committee was also sympathetic to the tax increase cause.
Hard-line chamber president Richard Lesher shot back that Mr. Thayer ''was speaking basically for himself.''
Thayer then canceled a scheduled Aug. 16 meeting of the executive committee -- apparently because he did not have the support to make good on his promise to the President.