Aug 1, 2022 - Politics & Policy

Corporate America strikes back

Illustration of a briefcase with an accordion-spring boxing glove coming out of it.

Illustration: Brendan Lynch/Axios

Corporate America has launched a two-pronged, eleventh-hour assault on Democrats' reconciliation package by targeting Sen. Kyrsten Sinema (D-Ariz.), the one person that big business hopes can stop — or modify — the $740 billion bill.

Why it matters: If successful, the barrage of paid media and personal phone calls will knock out the main provision that terrifies the business community: a 15% minimum book tax that will cost the biggest 150 U.S. companies some $313 billion over 10 years.

State of play: The clock is ticking to persuade Sinema to play her hand — and potentially force Senate Majority Leader Chuck Schumer (D-N.Y.) and Sen. Joe Manchin (D-W.Va.) back to the drawing board on how to pay for the $370 billion in new climate spending.

  • "She’s feeling the pressure to vote yes on something,” Danny Seiden, president and CEO of the Arizona Chamber of Commerce, told Axios. "I hope that she gets this deal opened back up."
  • "It really hits Arizona businesses hard," he said. "Arizona has done a fantastic job growing our manufacturing sectors."

Driving the news: The National Association of Manufacturers and the Arizona Chamber have launched a six-figure digital and TV ad buy — compressed into one week — to saturate the Phoenix and Tucson media markets.

  • "Taxes won’t strengthen supply chains, promote energy security, or fill vacant jobs," the narrator says. "Say 'No' to taxes that would devastate Arizona manufacturers."
  • The U.S. Chamber of Commerce is also taking out a full-page ad in both the Arizona Republic and Arizona Daily Star making a policy argument against the corporate minimum tax.
  • Local business leaders have been calling Sinema directly to explain how the tax increase could affect hiring in Arizona.

The big picture: After news of the secret Schumer-Manchin deal broke last Wednesday, corporations realized their balance sheets were in peril. CEOs and private equity titans quickly turned their attention to Sinema, who is reserving her options to modify the climate and deficit-reduction bill.

  • The 15% minimum tax would mostly hit big manufacturers who use tax deductions and credits for capital investments and R&D to minimize their overall tax bill, according to the Wall Street Journal.

The intrigue: Opponents of the legislation don’t need Sinema to strangle the bill.

  • They just need her to raise specific objections to some of its key planks, causing the legislative Jenga tower — which raises money from big business, private equity and the pharmaceutical industry to fund climate and health care priorities — to collapse under the weight of its own ambitions.
  • On Monday, Manchin again expressed confidence that Sinema, whom he called a "friend of mine," would ultimately support the framework.
  • "She’s been very adamant in this bill on no tax increases," Manchin told reporters today. “I take that very seriously.”

Between the lines: Manchin and other Democrats are couching their new tax provisions as a simple matter of closing loopholes. But one senator's loopholes are another's important incentives.

  • Congress loves to encourage businesses to invest in preferred activities, only to decry the loss of revenue down the line.
  • The $280 billion China competition bill, for example, is built upon a series of tax credits for the semiconductor industry.
  • And the centerpiece in the Schumer-Manchin deal, renamed the Inflation Reduction Act, is a collection of green energy tax credits that will allow companies to lower their overall effective tax rate.
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