Business Coalitions Zero In on Tax Increases

Businesses and advocacy groups plan to dial up pressure on Congress to block tax increases, as lawmakers prepare to head home for the August recess.

Business advocates hope the expiration of the Bush-era tax cuts at the end of the year will become a flashpoint at town hall meetings and other gatherings, just as health care and government spending were during last year’s August break.

In a pair of letters to lawmakers later this week, businesses plan to raise concerns about looming tax increases on investment income and also on individual income. The groups will argue that the ultimate effect of the tax increases will be to “discourage investment in the recovering U.S. economy and in job creation,” according to a person familiar with the effort.

The effort is being organized by a couple of coalitions. One, the Alliance for Savings & Investment, has about 25 investment group and company members; it focuses on tax relief for investors. The other organization, the Tax Relief Coalition, includes major business organizations such as the U.S. Chamber of Commerce, as well as manufacturers, contractors and others.

Conservative activists are hoping the issue of the expiring 2001 and 2003 tax breaks will catch fire among grassroots tea party groups, too.

“It’s something people everywhere are interested in,” said Max Pappas, vice president of FreedomWorks, the conservative activist group. “There’s pretty broad agreement that higher taxes mean less economic growth.”

Meanwhile, talks continued in the Senate this week over how to deal with the Bush tax cuts, which lapse on Jan. 1. But a number of issues remain outstanding. For example, Democrats are searching for consensus on whether to extend the breaks for all individuals, or let tax rates rise for higher earners – basically families making more than $250,000 – as President Barack Obama and many House Democrats want.

Other issues include how to address the impending re-imposition of the estate tax in 2011, as well as whether any tax relief should be permanent or only short-term, as the government tries to address large future budget deficits and debt. Even if Senate Democrats find a tax package that works for them, they will have trouble signing up Republicans, who sense a powerful political issue for the fall campaigns, and remain unhappy over what they regard as heavy-handed tactics by the majority party this year.

As a result, any final congressional action before November’s elections still seems unlikely. But Senate Democrats are making an effort to pass their tax-cut extension, and action by the Finance Committee before August remains a possibility.