Biden clashes with business groups over tax hike

President Biden is facing his first big test with the business community after industry leaders made clear Wednesday they will not support an infrastructure package financed in part through a corporate tax hike.

The business community has long called for broad infrastructure legislation and previously embraced Biden’s commitment to spend massive sums on roads, bridges and even climate change initiatives. But they’ve also warned that he would lose their support if he insisted on raising taxes for U.S. companies.

Now, trade groups say they plan on making their case to lawmakers.

“We’ll be lobbying Congress on both aspects of the plan — infrastructure and tax. We want to find a path forward that does not include an increase to corporate tax rate,” a spokesperson for the Retail Industry Leaders Association told The Hill.

Neil Bradley, chief policy officer at the U.S. Chamber of Commerce, said the Chamber is “prepared to lobby to make sure” the final bill does not include higher taxes.

Those comments came on the heels of the Business Roundtable saying it strongly opposed a tax increase and wanted Congress to come up with a solution to fund infrastructure another way.

The White House has said it will work with congressional Republicans and Democrats in hopes of finding common ground for financing the infrastructure package. But GOP lawmakers are highly unlikely to support any new taxes or tax increases.

Biden’s proposal would increase the corporate tax rate to 28 percent and establish a minimum global tax. The 2017 GOP tax law lowered the corporate tax rate from 35 percent to 21 percent.

The National Association of Manufacturers voiced support for Biden’s plan on Wednesday, just not the way he wants to pay for it.

“Achieving our shared goals will be the result of debate, discussion and collaboration with the administration and both parties in Congress,” CEO Jay Timmons said in a statement. 

The Association of Equipment Manufacturers also urged Biden “to make sure that we preserve the predictability and stability in the tax code that keeps equipment manufacturers competitive and drives job creation and good wages.”

Senate Minority Leader Mitch McConnell (R-Ky.) said on Wednesday that Biden called him about the infrastructure proposal on Tuesday, with the GOP leader saying he was “not likely” to support a final bill that includes raising taxes or deficit spending.

Biden addressed the funding issue during Wednesday’s speech in Pittsburgh, where he unveiled his roughly $2 trillion proposal.

“I spoke to the Republican leader about the plan. Everybody’s for doing something on infrastructure. Why haven’t we done it yet? Well, no one wants to pay for it,” Biden said.

Some business groups have suggested a gas or mileage tax as a way to finance the projects proposed by Biden.

Bradley told The Hill that the Chamber would support a gas tax or mileage tax increase to pay for infrastructure. But Transportation Secretary Pete Buttigieg said earlier this week that neither one will be part of the conversation around the bill.

Business groups largely indicated that they don’t consider this the end of the discussion and that negotiations are just getting started. White House press secretary Jen Psaki has made similar comments, saying earlier on Wednesday that this is “the beginning of a process.”

“It’s clear there’s a potential for the business community to support a broader infrastructure plan, something that they’ve long called for, and it’s important to remember we’re only at the very beginning of this process,” said Stacey Rolland, senior vice president at Forbes-Tate Partners who worked in the Treasury Department during the Obama administration and as a senior policy adviser to Speaker Nancy Pelosi (D-Calif.).

“There will be a lot of work, discussions with members, and negotiations ahead to strike the right balance for passage,” she added. 

But the swift response from the business community nonetheless marks a notable shift in its relations with Biden. When Biden’s $1.9 trillion COVID-19 relief package passed Congress without Republican support, the business community largely embraced it.

Jason Fichtner, chief economist at the Bipartisan Policy Center, said it’s not yet clear how hard of a line business leaders are likely to draw on the issue.

“With the corporate income tax, is it a deal breaker? I don’t know,” he said. “I think if the administration sticks to the 28 percent rate, it will be very hard for the business community to swallow.”

The next few weeks and months, he said, will certainly test Biden’s relationship with a constituency that has largely sided with Republicans over the years.

“I think it’s definitely a test. The test comes with any time you have revenue raisers on the table, you’re trying to raise somebody’s taxes. Everyone’s all for the idea of raising revenues as long as you don’t raise it on them,” he said.