A Tax Cut's Tough Crowd

By KAREN TUMULTY

A key piece of President Bush's economic plan, ending the tax on dividends, is getting the silent treatment from what is typically a core source of support for this White House: the business world. The last time the idea was raised, during Ronald Reagan's 1986 tax-reform effort, big corporations actively fought it because they didn't want shareholders to hound them for dividends when they would rather invest the money elsewhere. This time most companies have kept quiet--in part, congressional sources say, because they fear getting on the wrong side of a White House that is known to have a long memory. "The White House is pressuring them," says Congressman Bob Matsui, a California Democrat who is a member of the tax-writing Ways and Means Committee and who is close to Silicon Valley technology interests. "[But] I don't know of any group of businesses that are pushing this thing."

That is why supporters of the measure are hoping to turn up the volume. The Business Roundtable, an early proponent of the idea, last week released a study indicating that the dividend component of the tax cut could add 500,000 new jobs each year for the next five years. Separately, an anti-tax organization called the Tax Relief Coalition has recruited 20 business organizations for a "working group" on the issue. Its first meeting is set for this week. If that is not enough to entice businesses to get on board, maybe another kind of pressure will. Activist Grover Norquist, who works closely with the White House, warns the business world to think long term. "You want to be in on next year's package?" Norquist asks. "Then salute this year's." --By Karen Tumulty