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Businesses Steer Clear of Payroll Tax Fight

The noisy partisan fight over whether to extend a soon-to-expire payroll tax break has elicited relative quiet from K Street.

The business community appears to be reluctant to wade into such a politically charged debate, which has pitted Democrats against Republicans and even caused internal strife between GOP leadership and its rank and file.

Several sources on and off the Hill said Democrats, who have pushed for the extension as a top priority, had made overtures to the business community to champion the cause — to no avail. In addition to trepidations over the potential political fallout over the issue, lobbyists noted that the business community was not unified on the issue of the payroll tax break.

“There is a recognition that this is a political decision on the Hill,” said Jade West, senior vice president of government relations for the National Association of Wholesaler-Distributors and executive secretariat for the 1,000-member Tax Relief Coalition. “We’ve just got our heads buried in the sand on this one.”

Added another lobbyist: “It’s so bitter and so brutal and intended to inflict as much harm on the other side; it’s not a good place to engage.”

One area in which the business community is speaking up, however, is against the “pay-fors,” including a tax increase for millionaires, which may be part of the payroll tax extension package that the Senate plans to vote on Friday.

“There isn’t much division on the issue of the pay-for,” West explained. “There just isn’t any bending or collapsing on the belief that raising marginal rates is a bad idea.”

That’s why the U.S. Chamber of Commerce has come out against the Senate Democrats’ bill. “The Chamber does not believe an unproven temporary tax incentive should be paid for with increased permanent tax hikes on those who save, invest, and operate small businesses,” the chamber’s R. Bruce Josten wrote in a letter alerting Members of Congress that the big business lobby may include the bill in its annual “How They Voted” scorecard.

Democratic leaders have been pushing for the millionaire surtax, while GOP leaders have backed the idea of freezing federal workers’ pay. Senate Majority Leader Harry Reid (D-Nev.) said Wednesday that Democrats may look at spending cuts as a way to pay for the payroll tax holiday.

President Barack Obama warned Republicans on Wednesday not to attach any “extraneous issues,” such as an extension of an oil pipeline, to the payroll tax cut extension. The president went so far as to threaten a veto if that happens.

Amid all this political maneuvering, the business interests that back the payroll tax holiday extension are doing so with little fanfare and are quick to point out its shortcomings.

“We support the extension of the tax credit, but if the goal is to create jobs, lowering the corporate tax rate is a much more effective way to accomplish that goal within the retail sector,” said Brian Dodge, spokesman for the Retail Industry Leaders Association.

David French, senior vice president for government relations at the National Retail Federation, said his group also wants the payroll tax cut extension. But, he added, “It’s probably not, in the long run, good policy. It’s running the risk of putting the Social Security trust fund in jeopardy.”

French also said retailers have found it difficult to measure the “true benefit” of the payroll tax break. While it does put cash back into consumers’ pockets, “for much of the year, high energy costs eroded that,” he said.

The problem with short-term tax relief, he noted, is that “now we’re looking at a cliff” if it expires.

One tax lobbyist, who noted that business interests don’t want to be used in the bitter payroll tax fight, said K Street has higher tax priorities, including extending the popular tax credits for companies doing research and development. These corporate stakeholders worry that the payroll tax debate may take away attention from those higher priorities.

“There has been some difficulty gaining traction on those,” the lobbyist said. “I just don’t know what is viable at this point.”

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