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Bad for Business

President Bush will have to work very hard to reverse this week’s Senate vote to slash his tax cut plan. If Congress cuts the President’s request in half the Democrats can thank a coalition of nonprofit groups calling itself “Fair Taxes for All.” And they can thank the corporations that make philanthropic contributions to these groups.

Led by People for the American Way, Fair Taxes for All (FTFA) includes over 172 mainly tax-exempt groups, from Martin Sheen’s online anti-war group “MoveOn.org” to the feminist Ms. Foundation.

Now don’t assume FTFA defines “fair” as taxing all citizens at the same rate or cutting your taxes in proportion to the size of your tax burden.  No: FTFA worries that new tax cuts will “inequitably distribute the benefits they provide.”

Come again? The U.S. economy has had two quarters of negative growth in 2001 and anemic growth ever since. Our unemployment rate continues to climb from a low of 4 percent in early 2000 to 5.8 percent now. The economy is long overdue for growth, but FTFA is concerned about how benefits are distributed. It’s focused on slicing-up the pie when most Americans want policies that will make it grow larger.

The President’s pro-growth proposal is the right medicine. It will grow the economy. It has two key features: the President wants to accelerate the phase-in of previous tax cuts passed in 2001 and he wants to eliminate the double taxation on dividends. These measures lower the cost of doing business and allow workers to keep more of their income. They are strong incentives to work and invest, which will generate real economic growth.

The tax cut on dividends is especially important. People need an incentive when they take the risk of investing their hard earned money in business. And one good incentive is to let them know that they will not have to pay a tax on any dividend payments they receive.  The more people invest in business, the more jobs business can create. President Bush’s tax cut is pro-investment; it will help reduce the rising rate of unemployment.

By contrast, FTFA advocates a “short-term stimulus” plan that is supposed to get consumers to spend a little more money now, not invest their savings for the long-run.

What’s shocking is the number of major American corporations that have lavished their philanthropy on groups in FTFA. Between 1998 and 2001, 29 groups in FTFA received a total of $13.5 million from more than a dozen corporations. Many of these corporations have had to lay-off workers, yet they fund FTFA, which opposes the President’s pro-growth, job-creating tax cut policies.

ACORN–the Association of Community Organizations for Reform Now–is a member of FTFA. ACORN activists shakedown banks for contributions by threatening them with federal regulation. And giving money to groups like ACORN helps produce policies that are job-killers. Yet ACORN received over $1 million in grants (1998 – 2001) from the corporate foundation of the financial powerhouse JPMorgan Chase. Last fall JPMorgan Chase announced it was reducing its investment banking staff by as much as 20 percent. Perhaps some of those laid-off staff were investment analysts who could have told the company’s executives that their gifts to ACORN were a big mistake.

JPMorgan Chase is not the only self-destructive corporation.  Between 1998 and 2001, the Bank of America gave FTFA members $245,000, Citigroup gave $170,000, DaimlerChrysler gave $650,000, and UPS contributed a whopping $1.3 million.  Each corporation also has announced job cuts; DaimlerChrysler cut 26,000 jobs.

The President’s proposal will generate economic growth and create more jobs. And it’s fair–a rising tide floats all boats. But FTFA’s narrow definition of fairness will stymie growth and investment. It amounts to the equal distribution of misery.

The Fortune 500 companies who sponsor Fair Taxes For All ought to know that they are helping FTFA become a powerful political force against economic growth. Corporate executives who let this happen neglect their responsibilities to shareholders. They’re also not acting in the best interest of their employees. At best they are spreading the misery, equally to all.

This article originally appeared in TechCentralStation.com.