US businesses turn to tax fight



KEVIN DRAWBAUGH & KIM DIXON

Published — Wednesday 14 November 2012

Last update 14 November 2012 6:55 am

| نسخة PDF Print News | A A

WASHINGTON: Major US businesses are plunging into the Washington tax policy debate now that the elections are over and some are in an awkward position after betting heavily on Mitt Romney.
The Republican, who lost in last week’s presidential vote, was backed overwhelmingly not only by Wall Street, but also by the oil and gas, agribusiness, construction, private equity and transportation sectors, according to data from the Center for Responsive Politics.
That puts some businesses on the outs with President Barack Obama and his fellow Democrats, who tightened their grip on the Senate in last week’s elections, some corporate lobbyists said.
“For most businesses, this wasn’t necessarily their desired outcome ... There’s some patching up that needs to be done,” said Pam Olson, a tax lawyer at PricewaterhouseCoopers and a former senior tax official under President George W. Bush.
Alone among major segments of Corporate America, the high technology and communications sector wagered heavily on Obama.
Tax breaks that are central to businesses, both in and out of favor with Democrats, will be in play as Washington deals with the year-end “fiscal cliff” and as lawmakers edge toward a possible full-scale overhaul of the tax code in 2013-2014.
The president is expected to meet with business leaders today to talk about fiscal issues. Top of the agenda: avoiding the fiscal cliff, which is a volatile mix of tax increases and spending cuts that, absent a deal in Congress to deal with it, could push the United States into recession.
Among those slated to attend the White House meeting are General Electric Co. Chief Executive Jeffrey Immelt, already a top Obama adviser, American Express Co. CEO Kenneth Chenault and Aetna Inc. CEO Mark Bertolini.
“I really don’t think it’s any secret that the business community has had some reservations about the agenda in Washington over the course of the last four years, but that is now history,” Jay Timmons, head of the National Association of Manufacturers, said last week on a conference call with reporters.
The tax aspects of the “fiscal cliff” mostly apply to individuals, but some corporate breaks are involved. One is a provision that lets companies accelerate depreciation of new equipment. This is scheduled to expire at the year-end, potentially raising tax costs for capital-intensive businesses.
Similarly, the research-and-development tax credit cuts across multiple sectors. The R&D credit — one of many items on the “tax extenders” list — expired at the end of 2011. It is up for renewal and has wide political support.
Divisions will emerge as the tax debate unfolds among businesses based on the actual tax rates paid by each sector. Retailers such as Wal-Mart Stores Inc. tend to pay higher rates, while drug makers such as Pfizer Inc. pay much less than the 35 percent corporate tax rate that is on the books.
Further, businesses organized as “S-corps” — which pay taxes through the individual tax code and not the corporate tax code as “C-corps” do — will see tax rates rise if Congress agrees with Democrats to lift rates on income above $ 200,000.
Case in point: JPMorgan Chase & Co. CEO Jamie Dimon’s recent statement that he would be willing to pay higher personal tax rates in exchange for a deficit-cutting deal at year’s end. As a C-corp CEO, Dimon’s personal tax situation does not affect JPMorgan. That is not the case for an S-corp executive.
Other corporate tax provisions are more specific. Some have been targeted for repeal by the Obama administration, possibly to help pay for lowering the overall corporate income tax rate from 35 percent and potentially paring the deficit.
Private equity firms have fought for years to protect the “carried interest” tax benefit that lets senior partners pay the 15 percent capital gains tax rate on a big slice of their gains, rather than the top 35 percent income tax rate.
The Obama administration has targeted the carried interest break for repeal, but the industry so far has fought this off.
Oil and gas companies have several tax provisions — such as the well depletion allowance and expensing of intangible drilling costs — that they have defended for many years. Obama would like to remove these, too.
“We certainly don’t want to be used as a pay-for,” said Brian Johnson, a senior tax adviser at the American Petroleum Institute, the industry’s trade group, using Washington short-hand for a tax provision that would raise revenues if repealed.
He said the industry has no fences to mend with Democrats and that raising taxes on energy companies would be “a short-sighted solution.” The institute is set to kick off a multi-state advertising campaign within days.
Silicon Valley and the communications business are in a better position than energy and finance companies in defending their tax positions, said Dean Garfield, president of the Information Technology Industry Council, which represents technology companies.
Regarding the general state of business-White House relations, Garfield acknowledged: “There are some feelings that have been hurt.”
Looking to 2013, lawmakers are aiming for a full-scale revamping of the tax code. Carrying out this politically dicey task is far from certain, but the effort will reveal big fault lines.
For example, curbing the value of big breaks such as the home mortgage write-off is among the options being floated to minimize the code’s special favors. That would hurt homebuilders and banks that finance housing, but it would leave export-heavy industries such as technology and aerospace relatively unscathed.
An analysis by the Center for Responsive Politics, a campaign finance watchdog, showed that executives and family members of energy and natural resource companies gave $ 8.6 million to Romney and $2.2 million to Obama.
The figures, drawn from Federal Election Commission records, are current up to Oct. 25 so they exclude the campaign’s last days before the Nov. 6 election.
The energy sector’s nearly 4-to-1 bias toward Romney exceeded Wall Street’s. The finance, insurance and real estate sector donated $52.1 million to Romney and $ 18.7 million to Obama, a nearly 3-to-1 ratio, the data showed.
Other sectors that backed Romney included agribusiness at 3-to-1; construction, about 2-to-1 and transportation, 4-to-1.
Conversely, Obama was supported by the communications and electronics sector by about 3-to-1.
“An election is really a reset button and the American people have spoken. They have chosen their leaders. The business community will respond to that,” Timmons said.

— Kevin Drawbaugh & Kim Dixon are columnists with Reuters. The views expressed are their own.

What's happening around Saudi Arabia

JEDDAH: Employees of the Education Office in Al-Daer governorate, Jazan, where seven people were gunned down on Thursday are in a state of shock and perplexed as to what prompted the attacker — a teacher — to take such an extreme step.The teacher, id...
JEDDAH: The campaign to support Syrian refugees with all their needs is being carried out effectively, as per the directives of Custodian of the Two Holy Mosques King Salman, Crown Prince Mohammed bin Naif and Deputy Crown Prince Mohammed bin Salman....
RIYADH: The Ministry of Municipalities and Rural Affairs has ordered the allocation of separate sections for female members of municipal councils.This was announced by Jedaie Al-Qahtani of the ministry. “This is in implementation of Clause 107 of the...
DAMMAM: The 9th Saudi Student Conference which is being held on Feb. 13-14 is sponsored by Umm Al-Qura University and hosted by the University of Birmingham in the United Kingdom. It was organized by the Scientific Society for Saudi Students in the...
RIYADH: Over the past 10 years, begging in the Kingdom has increased substantially, with the number of organized gangs of expatriate beggars increasing to 85 percent of the total number of beggars, according to Social Affairs Ministry Majed Al-Qassab...
RIYADH: The Ministry of Health said it expects its blood donation drive will received 450,000 milliliters (ml) of blood when the Janadriyah festival ends on Feb. 19.Khalid Ibrahim Zobaie, who supervises the blood donation project, said the drive is i...
JEDDAH: The Shoura Council’s decision to reduce working hours in the private sector from 48 hours to 40 hours per week would result in additional operational costs in the sector due to 30 percent higher wages for expat workers, according to Mansour b...
MADINAH: Madinah Gov. Prince Faisal bin Salman recently visited a number of ongoing developmental project sites in the Holy City, as part of his efforts to ensure that they meet the set standards and deadlines.During the visit, he said that all the s...
RIYADH: The National Guard Ministry is studying the possibility of having two countries as guests of honor each year instead of one at the Janadriyah festival for culture and heritage, the Kingdom’s most prestigious annual festival.This was revealed...
DAMMAM: The Pakistan International School in Alkhobar hosted their 49th annual prize distribution ceremony to honor outstanding students in the presence of Pakistani Ambassador Manzoor Ul Haq and his wife, Nighat Manzoor.Haq appreciated the efforts o...
DAMMAM: The Weaam Association for Family Care in the Eastern Province has succeeded in addressing more than 700 cases of family disputes during the last one year.Abdulrahman Al-Khudair, Weaam’s director of public delations, said: “The association off...
JEDDAH: The Nakheel mall case has continued to grab the limelight, with a number of lawyers now offering their services to the girl who was roughed up by some Haia members in Riyadh. Some people also expressed, through social media, their support to...
RIYADH: Grand Mufti Sheikh Abdulaziz Al-Asheikh inaugurated this week a campaign tosafeguard Saudi society against bad influences.“The campaign seeks to immunize society in the Kingdom from deviant ideas as well as utter lies and heresies that could...
RIYADH: A Filipino nurse, from Lamitan Basilan in southern Philippines, has been missing since Feb. 6.According to a co-worker at the clinic where she works, the 43-year-old nurse, a mother of one, was last seen at 3 p.m. on Saturday.“She told us she...
JEDDAH: The Ministry of Haj will put in place new measures for issuing Umrah visas for pilgrims from outside the country with the coordination of the Saudi embassies abroad, a local newspaper reported.The new measures will be implemented soon, given...

Stay Connected

Facebook