The 'Mother of All Tax Bills'

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The manufacturers' credit has vocal supporters, too: "At first blush, it seems like the tax increases will outweigh the corporate rate cuts for most of our members," says Dorothy Coleman, a vice-president at the National Association of Manufacturers. (NAM declines to disclose its membership.)

Finally, even the changes in foreign tax rules will split the business community, says Scott Talbott, senior vice-president for government affairs at the Financial Services Roundtable, a trade association that includes some of the biggest financial institutions in the country, including American Express (AXP), JPMorgan Chase (JPM), and Wells Fargo (WFC). "It places U.S. companies with an international presence on the other side of the table from U.S. companies who only operate [domestically]," Talbott says.

For and Against

At the same time, the Rangel ideas are likely to find warm support among retailers, who are largely domestic, and whose just-in-time inventory tactics mean they will be little affected by the LIFO accounting changes. Rachelle Bernstein, vice-president of the National Retail Federation, explains that her group has long supported lowering the corporate rate while broadening the base of dollars that are subjected to the tax, which is what Rangel's proposal would do. "We certainly like the direction of the proposal," Bernstein says. Her group includes companies such as J.C. Penney (JCP), Sears (SHLD), and Home Depot (HD).

Another industry indicating early support is aerospace: "We are encouraged," says John Douglass, president and chief executive of the Aerospace Industries Assn. "This is a good first step in the process of achieving meaningful tax reform." The association's members include Boeing (BA), Honeywell (HON), and Lockheed Martin (LMT).

Elsewhere in the bill, Rangel proposes changing the rules on taxation of carried interest on investment fund managers, which he says will raise $25.66 billion in 10 years as one measure to help pay for the AMT repeal; the repeal will cost a hefty $795.6 billion over 10 years. The carried interest proposal sparked immediate outrage from hedge fund managers when it was floated over the summer, and it is thought to be all but dead this year in the Senate.

The Rangel proposal was immediately denounced by Republicans on Capitol Hill as the "Mother of All Tax Hikes." Treasury Secretary Henry Paulson Jr. came out against it, saying, "The legislation unveiled today would dramatically raise taxes in ways that, in my judgment, would hinder America's ability to compete in the global economy."

Javers is BusinessWeek's Capitol Hill correspondent.