Big Business Pushing for Relief in Tax Cut Plan

President Bush touted the benefits of his proposed tax cut for small businesses Tuesday, but representatives of some of America’s largest industries protested that there is nothing in the package for them.

They quietly are working on a plan that also would cut the income taxes paid by corporations, seeking support within the White House and on Capitol Hill for their argument that a foundering economy needs the boost that lower corporate taxes would bring.

Major tax cuts enacted under President Kennedy 40 years ago and President Reagan 20 years ago reserved 30% to 40% of their benefits for corporations. The big companies see nothing close to that in the plan Bush likely will present to Congress on Thursday.

“It’s hard to see a major tax bill going through Congress without something for business,” said Steve Moore, head of Club for Growth, a political group that is lobbying for tax cuts larger than Bush is proposing.

One senior Democratic aide predicted that Congress would come under enormous pressure to bulk up the business component of Bush’s tax cut. “Business is wondering right now, ‘What’s in it for us? Here we have a Republican president, and what’s in it for us?’ ” said the aide, who asked not to be identified.

The CEOs of several Fortune 500 companies--including PaineWebber Group Inc., ConAgra Foods Inc., General Mills Inc. and General Electric Co.--are expected to visit the White House today. And it is likely the president will hear a last-minute appeal to include a corporate tax rate cut.

But it may be a tough sell. Bush has insisted that his tax cut--$1.6 trillion over 10 years--will be the one he talked about during the presidential campaign, no more, no less. It would reduce the tax rates paid by individuals but not by corporations.

“Bush is serious. He wants his tax cut,” a senior White House official said Tuesday. “He will fight this,” the official added of any attempt to change the package.

Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) cautioned the business community about getting its hopes too high. “I don’t believe there’s going to be any significant business tax changes in this package.”

The president left the White House on Tuesday to visit Tree Top Toys in McLean, Va.--his mother shopped at the store’s Washington branch when she lived here--to emphasize his plan’s effect on small companies. Standing amid the wooden trains and Madame Alexander dolls, Bush said of his plan:

“By dropping the top [individual tax] rate from nearly 40% to 33%, we really say to the sole proprietor, the business owner, that there’s more capital available for you to expand your business, if need be; there’s more of your own money in your own pocket to be able to make sure your small business flourishes.”

And by decreasing withholding rates and increasing take-home pay, he said, the plan would provide the toy boutique’s customers with more to spend at a time when they are facing new economic concerns.

“We have an issue in America right now called energy, and the energy prices are beginning to affect the purchasing patterns of the people who come to the shops such as this one,” the president said.

But Mark Bloomfield, president of the American Council for Capital Formation--a lobby that specializes in working for business tax cuts--argued that workers “are being laid off, and the people who employ them are paying more taxes than their competitors around the world. If you have an unemployed individual, they want a job, not a tax cut.”

No one industry or company is at the forefront of the push for corporate tax rate cuts, which is being led by an ad hoc group of trade association executives and business lobbyists.

In this camp is Henson Moore, president and CEO of the American Forest Products Assn., who said big business needs tax relief as much as small business.

“The administration does need to consider an affordable, meaningful provision for corporate America,” he said. “We’re in a recession too, and we can assist the economy in coming back. We need to find something that will appeal to all corporate America.”

That, he said, would avert a grab-bag of tax breaks sought by individual companies and industries.

Dorothy Coleman, a National Assn. of Manufacturers’ vice president specializing in taxation, said there was “a real concern about making [the tax plan] a corporate Christmas tree.”

But she said that business needs changes in tax laws dealing with pensions, depreciation and international operations of American companies. She said she favors a second tax bill dealing strictly with corporate America’s interests.

Not likely, said Sen. Charles E. Grassley (R-Iowa), chairman of the tax-writing Senate Finance Committee. He specifically discouraged talk of a proposal, backed by a coalition of business groups, to cut taxes by changing depreciation provisions, which could cost $347 billion over 10 years.

“It’s going to be very, very difficult to do something that big as a second tax bill,” even next year, Grassley said.

Thomas J. Donohue, president and CEO of the U.S. Chamber of Commerce, said that, while the chamber was not pressing specifically for corporate tax breaks, “if the window is there, we will be there in the most vigorous way to adjust corporate taxes, because all boats will go up with that tide.”

Bloomfield warned that businesses risk losing any chance to shape the tax cut if they pursue conflicting parochial concerns rather than uniting behind a single pro-business agenda.

“Business is beginning to express their concerns,” Bloomfield said. “My major concern is that whenever the business community is balkanized the business community fares poorly in a tax bill.”

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Times staff writer Ronald Brownstein contributed to this story.