Business groups, sensing victory, keep up pressure over tax hikes

Business groups are on the verge of cutting corporate tax increases out of Democrats’ multitrillion-dollar social spending package in what would be a significant lobbying victory that seemed improbable just a few weeks ago. 

President Biden has acknowledged that Democrats no longer have the votes to raise tax rates on corporations after Sen. Kyrsten Sinema (D-Ariz.), who previously campaigned against the GOP’s 2017 corporate tax cuts, announced her opposition to tax hikes Friday.  

The reversal follows months of ad blitzes and lobbying from the nation’s largest companies and their business groups opposing tax increases.  

Those organizations are airing ads this week to ensure the final bill doesn’t include tax hikes as Democrats scramble to find alternative ways to fund huge investments in climate change, child care and education. 

“It’s been quite the turnaround and it’s fair to say we can thank Sinema for that,” said a tax lobbyist with ties to Senate Democrats. “But you’re never out of the woods, not until you see the final bill.” 

K Street lobbyists predicted that Democrats would ultimately raise the top corporate rate from 21 to 25 percent, a number that Sen. Joe Manchin (D-W.Va.) said he is comfortable with. Lobbying has centered around Sinema, Manchin and a handful of moderate Democrats in the House and Senate who have voiced concerns about the reconciliation package. 

“I’ve been doing this kind of work in Washington for 30 years, and I’ve never seen this kind of outsized focus on one senator, or two senators, to this extent,” said Rich Gold, a Democratic lobbyist at Holland & Knight.  

Sinema’s resistance to tax rate hikes prompted Democrats to explore other revenue raisers, including a new annual tax on billionaires’ investments and a minimum corporate tax, which has also drawn criticism from business interests.   

But business groups are keeping the pressure on as Democrats near their self-imposed Sunday deadline to reach a deal on their budget reconciliation package, which must win the support of all 50 caucus members.  

America’s Job Creators for a Strong Recovery, a coalition of business groups, launched a six-figure ad campaign in Arizona Tuesday urging Sinema to stick with her position opposing corporate tax increases. 

The coalition, launched in May to oppose Democrats’ “human infrastructure” bill, includes the International Franchise Association, the American Hotel and Lodging Association and the National Association of Wholesaler-Distributors (NAW), which held a high-dollar fundraiser for Sinema last month.  

“Fortunately, Senator Kyrsten Sinema is continuing the proud tradition of independent leadership and bucking the enormous political pressure of D.C. insiders, and is instead fighting for Arizona’s small and Main Street businesses,” Eric Hoplin, CEO of NAW, said in a statement. 

The National Retail Federation, which represents companies like Walmart and Target, also launched a six-figure ad campaign Monday opposing corporate tax hikes. Other lobbying groups, including the U.S. Chamber of Commerce, the Business Roundtable and the RATE Coalition, are running their own social media ads urging Democrats to reject tax increases.  

Emboldened by their success thus far lobbying moderates, business groups are now prepared to fight alternative Democratic proposals to raise revenue for the reconciliation bill, particularly measures to enact a minimum federal tax on corporations’ income.  

Sinema tweeted Tuesday that she supports a minimum tax on corporations, bolstering the measure’s chances of passing the Senate.

“The proposal represents a commonsense step toward ensuring that highly profitable corporations — which sometimes can avoid the current corporate tax rate — pay a reasonable minimum corporate tax on their profits, just as everyday Arizonans and Arizona small businesses do,” she said in a statement.

Unlike the corporate tax rate, the minimum tax could divide business groups. Some companies that benefit from fewer tax breaks, such as retailers, support the concept. Others, like manufacturers, strongly oppose it.

Business groups are also worried about an international minimum tax proposal. Earlier this month, the Organization for Economic Cooperation and Development (OECD) announced that the U.S. and more than 130 countries agreed to a global minimum tax rate of 15 percent. Some business groups have warned Democrats not to implement a minimum tax for U.S. businesses until other countries do so, while others oppose any kind of minimum tax. 

“We remain especially concerned about the cumulative impact of the OECD proposal and the tax changes being sought by the administration as part of the reconciliation bill,” said a U.S. Chamber of Commerce spokesperson. 

Taxes are the top priority for many corporate lobbying clients. Through the first three quarters of 2021, roughly 6,200 lobbyists converged on Capitol Hill to influence tax issues, up from less than 5,900 lobbyists at the same point last year, according to data from money-in-politics watchdog OpenSecrets.  

K Street is enjoying booming business as corporate America seeks to influence Democrats’ agenda, with nearly all of the top lobbying firms bringing in record sums of cash through the first nine months of the year.  

While some Senate Democrats have privately joined Sinema in fighting for a smaller spending package, she is alone in opposing any kind of corporate rate increase, according to multiple lobbyists. 

Sinema’s position on corporate taxes is a shift from previous years. She voted against GOP tax cuts in 2017 and aired an ad attacking former Sen. Martha McSally (R-Ariz.), her 2018 Senate opponent, for supporting “huge tax breaks for the wealthy and large corporations at the expense of our middle class.” 

On Friday, Sinema’s office confirmed that the first-term senator does not support raising tax rates, arguing that increased rates wouldn’t impact tax dodgers.  

“She has told her colleagues and the president that simply raising tax rates will not in any way address the challenge of tax avoidance or improve economic competitiveness,” Sinema spokesman John LaBombard said in a statement last week. 

Sinema’s opposition to corporate tax hikes and the spending bill’s original $3.5 trillion price tag earned her praise from influential business groups. But she’s also drawn fierce criticism from progressive organizations, which have threatened to coalesce behind a primary challenger in 2024.  

“Senator Sinema can’t really point to public support for her flip-flop on the Trump corporate tax giveaway or to any history of trickle-down policies working, so that only leaves the money,” said Kyle Herrig, president of Accountable.US, a progressive group that documented recent political donations to Sinema from the U.S. Chamber and its member companies’ PACs.

Updated 10:53 a.m.