Cliff divides big, small business
Groups that represent American businesses are in a bind. Some of their members declare their business income through their personal income taxes, and they are looking at the possibility of higher tax rates on the top tiers of personal income. Yet big corporations would be unaffected by higher tax rates because they pay corporate, not personal, income taxes. They're rooting for a lowering of the corporate tax rate.
Simply put, what's good for some businesses is not necessarily good for others.
"There is no difference, really. They want the same thing - lower rates, certainty, simplification, and sound transition rules," insisted Bruce Josten, vice president of the U.S. Chamber of Commerce and the influential group's top lobbyist.
"It's hard to talk about a hypothetical," said Dorothy Coleman, vice president of tax policy for the association. "Right now we are very much focused on going to the Hill and spreading our members' concerns."
Manufacturers want Congress to avoid the fiscal cliff of expiring tax measures and automatic spending cuts, which if left unchanged this month could send the economy skidding downward.
"We're going to lose jobs, we're going to probably go into a double-dip recession, and it's going to set us back about 10 years," Coleman warned.
The most immediate threat for many businesses is allowing the Bush-era tax cuts on personal income to expire at the end of December. President Obama wants to extend them for everyone but the top 2 percent of earners. That might be good for middle-class Americans, but it could hurt many of the roughly 4.5 million business owners who are "S corporations," whose business earnings are declared as personal income on their 1040 tax forms.
In a Nov. 27 letter to congressional leaders from both parties that spells out the competing interests, 42 trade associations whose members mostly declare their business earnings through their personal taxes pleaded for lawmakers to avoid pitting them against corporate interests.
"There is no economic or political justification for reform that lowers marginal tax rates on corporations while raising either marginal or effective tax rates on the 95 percent of businesses structured as pass-through entities," said the trade associations, whose members range from grocers to truckers to general contractors.
For big corporations whose shares are traded on the New York Stock Exchange, and who donate heartily to political campaigns, there's ambivalence about the tax plight of smaller firms. They're rooting for a deal that averts the fiscal cliff with a temporary measure that promises a comprehensive overhaul of the tax code next year.
