'Fiscal cliff' divides business groups

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A rift has opened in the U.S. business community over whether tax increases should be an important part of the government’s strategy for tackling the federal deficit and heading off destabilizing changes in tax and spending policies set to kick in at the end of the year.

The latest salvo was fired Wednesday when a coalition of business trade associations and advocacy groups warned Congress against agreeing to a deal that leans on new tax revenue. The group, which includes the Chamber of Commerce, the National Federation of Independent Business, and the National Association of Manufacturers, urged lawmakers to put deep cuts in federal spending at the center of any plan to reduce the deficit.

This group, dubbed the Tax Relief Coalition, is pushing back against a rival campaign led by prominent chief executives who called on Congress late last month to include increased taxes, alongside spending cuts, in efforts to tame the national debt. Among the companies involved in the rival campaign are the leaders of Honeywell, JPMorgan Chase, UPS and Aetna.

The escalating dispute comes two months before the United States is set to face a “fiscal cliff” of sharp tax hikes and spending cuts that will automatically take effect unless the White House and Congress agree on plans to avoid it. Many economists have warned that the combination of tax hikes and spending cuts could knock the wind out of an economy still struggling to recover.

Much of the disagreement among business leaders focuses on the recommendations of a bipartisan panel, known as the Simpson-Bowles commission, for addressing federal deficits. Although the chief executives of Honeywell, JPMorgan Chase and their allies have endorsed the panel’s recommendations as a starting point for Congress, the Tax Relief Coalition rejected the approach, saying that spending on programs like Social Security and Medicare is the main problem.

The coalition also objects to Simpson-Bowles because the recommendations assume that Bush-era tax cuts for wealthy taxpayers will expire at the end of this year. The coalition is urging Congress to extend the tax cuts for all taxpayers.

Maya MacGuineas, who is coordinating the chief executives’ campaign known as Fix the Debt, warned that the country needs a so-called grand bargain to get the government’s finances back on a healthy footing. She said that differences between big corporations and small businesses on taxes should be expected.

“Talking about the business community speaking as one voice is impossible, as there are as many business perspectives as people perspectives,” MacGuineas said.

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