SAME DIFFERENCE

Investors and corporate executives have had an entertaining show the last eight years--both on Wall Street and on Pennsylvania Avenue. The United States racked up unprecedented economic growth, as a volatile stock market weathered crisis after crisis and still managed to stay stratospheric, and as broad-based prosperity revived once-forlorn downtowns from New England to the Sunbelt. Meanwhile, the Clinton- Gore Administration has endured the loss of Congress to the Republicans in 1994 and somehow managed to work with its bitter partisan enemies to balance the budget, reform welfare, cut the capital-gains tax, and expand free trade--all while fighting like caged tigers over the President's impeachment.

With a few notable exceptions, the vast majority of companies have fared rather well through the capital chaos, making the possibility of change wrought by this fall's election campaign a matter of some importance and risk for CFOs.

There have been elections in which major-party candidates' attitudes toward issues of fundamental importance to corporations, such as trade or monetary policy, helped set the agenda. This campaign will not be one of them. In 2000, issues likely to grab the most headlines--Social Security reform, for example- -have more to do with personal finance than corporate finance.

Nonetheless, significant business issues, from Internet taxation to tort reform, will come into play as Al Gore vies with George W. Bush to become the nation's 43rd President. To a degree, the candidates' platforms are built on ideological beams that traditionally separate Democrats from Republicans. "There's a basic big-picture difference in that Vice President Gore looks toward much more government involvement, whereas Bush looks much more toward private-sector initiatives and the market," says Glenn Hubbard, a Bush campaign adviser and an economics professor at Columbia University's Graduate School of Business.

But to the Vice President's backers in the world of corporate finance, the support for government involvement is a positive, not a negative. "Gore understands the business and technology environment very well, and like a smart senior manager he recognizes that education is key," says Jonathan Foster, CFO and COO of Toysrus.com, and a Gore supporter.

Yet Bush and Gore, two essentially centrist, Ivy League­educated baby boomers, do substantially agree on such potentially divisive issues as free trade and Internet taxation. And what differences there are may even dissolve a bit further as the campaign gets under way and both parties diligently tack toward the center. Still, understanding those differences that are likely to remain as the major issues for business--even if the differences lie in emphasis or in the fine print--certainly helps bring the two candidates into sharper focus.

Internet Taxation
Online commerce has positively exploded since the 1996 Presidential election, with sales leaping from a few billion dollars then to an estimated $444.5 billion now, according to Forrester Research Inc. This remarkable growth has not escaped the attention of government officials at all levels, from small-town mayors to big-state governors. As a result, the question of whether to tax electronic commerce--and how to do it if the answer is yes--is certain to be a burning political issue.

Gore, who may forever regret his claim to have invented the Internet, and Bush, whose Austin office is surrounded by high-technology start- ups, have both taken great pains to align themselves with the forces forging the New Economy. "While he may not have invented the Internet, Gore has certainly been a player in all of these issues," says Ken Wasch, a Gore supporter who is president of the Software and Information Industry Association. "Bush has no record" there, Wasch says, "and he is dancing to the tune of advisers who are trying to guess at what will play."

The Internet Tax Freedom Act, passed by Congress in 1998, created a three-year moratorium on both Internet access taxes and multiple taxes on E-commerce. Both candidates support extending the freeze, for an additional five years in Bush's case and two years for Gore. "I also support a permanent ban on all Internet access taxes," Bush said last May.

But such rhetoric "just scrapes the surface of the whole debate, and they haven't said much beyond that," notes Mark Nebergall, president of the Software Finance and Tax Executives Council.

While no politician wants to be portrayed as favoring Internet taxes, mall owners, big-box retailers, and state and local governments have been lobbying for such taxation, at least as a way of giving them a share of online sales. Regardless of who is elected President, it is likely there will be some form of levy on transactions conducted over the Internet in the future. "That's the area that worries a lot of people," says Frank R. Goldstein, a partner in the Washington, D.C., office of law firm Brown & Wood LLP. "The Democrats have historically been a taxation party," he notes. "The question is, who's going to have the least-heavy hand when it comes to dealing with these entrepreneurial companies?"

New Tax Breaks
Rather than proposing sweeping governmental actions, both candidates seem to prefer manipulating the federal tax code as their way of encouraging companies to achieve desirable social goals. "I think it's very fair to say that Bush's notion of compassionate conservatism would include using the tax code for social engineering," says Jerry Howard, senior staff vice president for federal government affairs at the National Association of Home Builders.

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