Major US Companies Form Coalition In Support Of Bush Tax Cuts

by Leroy Baker, Tax-News.com, Washington

28 March 2003

With the future of President Bush's bold $726 billion economic stimulus plan hanging in the balance, some 1,000 firms have rallied together to form a Tax Relief Coalition. Its main objective is to lobby Congress in support of the dividend tax cut.

Some of the more well-known companies that have signed up to the coalition include General Motors, Morgan Stanley and Verizon Communications. The alliance has been up and running for about six weeks. It has used various methods to get its point across, including a 20,000 email and fax blitz to members of Congress stating the position of its members on the issue.

General Motors has also sought to garner support from its own shareholders by writing them a letter explaining the benefits of the dividend tax cut to the investor. GM argues that tax has already been paid once on its earnings, so the dividend tax merely penalises the investor. If the dividend tax is abolished: "The result is more money for you" GM told its investors.

However, the tax cut has not received unanimous support from the business community according to reports. For instance newly established firms that are not yet profitable enough to pay dividends have not been particularly vocal on the issue, with some arguing that the government should also consider other forms of tax incentives.

The dividend tax cut is seen very much as the centrepiece of Bush's overall plan. It is also the most expensive measure and given the prevailing economic circumstances of low confidence, budget deficit and war, it may not survive scrutiny as the bill shuttles back and forth between the House and the Senate. Ultimately, Congress faces a hard choice. In the words of Ralph Hellmann of government lobby group the IT Industry Council: "It's going to be dividends or the rest of the president's package, and that's a choice that they are going to have to face."

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