‘Fiscal cliff’ drives a wedge into the business world as Obama meets with CEOs

November 13, 2012

Advocates for small and mid-size businesses are increasingly challenging the motives of a select group of chief executives from major U.S. firms who will meet Wednesday with President Obama to discuss efforts to avert the “fiscal cliff.”

In public and private communications, conservative lobbyists for small businesses worry that the chief executives — who run companies such as General Electric, Honeywell and IBM — may sell them out. The lobbyists say they are concerned that the corporate leaders are recommending policies that protect big companies while leaving small ones exposed to a major tax increase if Obama gets his way in negotiations with Republicans on a debt deal.

Some conservative lobbyists are even circulating documents drafted by liberal groups that criticize the corporate chiefs by name as “tax dodgers” on the grounds that their companies avoid paying federal corporate taxes. One of those documents was circulated this year by Sen. Bernard Sanders (I-Vt.), a self-described socialist who caucuses with Democrats.

Advocates of small and mid-size businesses heaped criticism on the White House, saying it is failing to focus on the smaller companies, which account for about half of the nation’s economy.

“It’s disappointing that he only meets with a segment of the business economy,” said Dirk Van Dongen, president of the National Association of Wholesaler-Distributors. His group’s members last year reported sales of $4.2 trillion.

A collection of graphics from the 2012 election.

Van Dongen is part of a coalition of smaller businesses and trade associations that disagree with Obama’s effort to repeal the George W. Bush-era tax cuts for high-income Americans. Many small businesses are organized as “flow through” entities whose profits are passed through to owners, who are then taxed at individual income tax rates. Those rates would rise under Obama’s approach. That is why “the Bush tax cuts are so important,” Van Dongen said.

At the National Federation of Independent Business, tax counsel Chris Whitcomb said that “we are concerned that the White House is not thinking about the broader business community” as the country approaches the fiscal cliff, the dramatic tax increases and federal spending cuts that are set to kick in at the end of the year.

An administration official said the White House disputes the lobbyists’ claims and plans to meet with small-business leaders in the future.

Grover Norquist, the anti-tax activist who leads Americans for Tax Reform, predicted in an interview that the chief executives would probably provide the president with a politically useful “photo op.” He said they would be “acting like a group of trained seals” in front of Obama, who as president can influence their companies’ success with regulatory and tax decisions.

Mollifying some concerns of small and mid-size businesses, an organization of top corporate chiefs issued a statement Tuesday putting a short-term priority on extending the Bush tax cuts. The statement came from the Business Roundtable, which represents the country’s leading chief executives, including some scheduled to attend the White House meeting.

In addition to the chief executives of General Electric, Honeywell and IBM, the White House meeting is set to include the heads of Xerox, American Express, Wal-Mart, Procter & Gamble, Ford, PepsiCo and Chevron.

“We’re not trying to hurt anyone,” Honeywell chief executive David Cote said in a statement. “Rather we’re advocating a shared American solution to an American problem. . . . This is not about pushing the burden on any group to the exclusion of others.”

Norquist said it has always been the president’s goal to divide and conquer.

“He is from Chicago, and in Chicago the big corporations do well,” Norquist said, adding that small businesses in Chicago suffer under steeper regulatory and tax burdens.

Norquist’s group and many leading small-business groups opposed Democratic candidates in last week’s election. The Republican tilt of these business organizations, including the U.S. Chamber of Commerce, has concerned Obama and many of his top political advisers.

During the first years of the Obama administration, the White House limited meetings with the Chamber, openly favoring the Business Roundtable and the drug industry trade association, the Pharmaceutical Research and Manufacturers of America. The emerging split in the business community is worrisome to conservatives, who built the modern Republican Party relying on a united and generous business sector.

“It will be very unhealthy for the business community to be split like this,” Norquist said. Representatives from the Chamber of Commerce and major companies attend his weekly “Wednesday Meeting” of conservatives in Washington.

The Chamber and its representatives were not invited to the White House session Wednesday, though they are actively working on issues related to the fiscal cliff. Norquist predicted that the business groups would eventually be reunited in opposing Obama because he advocates tax increases.

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