White House and business split over tax Tensions between the White House and business community have risen after President Barack Obama proposed tax hikes on oil and gas companies, as well as on hedge fund executives, in a short-term fix to avoid $1.2tn in automatic spending cuts. It ended an armistice that had been observed since the president's re-election, when the Business Roundtable, a lobby group representing top chief executives, announced its support for higher tax rates on wealthy individuals as part of a broad tax revamp that would decrease rates for companies. It was a critical endorsement after years of frosty relations between business and the administration. As the nation faces its next big budget battle, the Business Roundtable and others have said they oppose the sequester, or across-the-board spending cuts that will hit the economy on March 1 if lawmakers do not act. But hours after Mr Obama urged Congress on Tuesday to delay the sequester by passing new tax increases on certain industries, the group's president, John Engler, said the proposal fell short. The targeted cuts, he said, "cannot substitute for comprehensive reform of the nation's century-old tax system." The split between the two sides could cast a long shadow over the prospect for broad tax reform and highlights how competing financial interests - from defence groups and healthcare companies to energy giants and private equity groups - have been pitted against one another in the face of the looming cuts. The sequester is set to slash the Pentagon's budget by $600bn over 10 years and spending on other government agencies by an additional $600bn. On Capitol Hill, lawmakers on both sides of the aisle are proposing ways to avoid the brunt of the cuts, including a Republican plan that would replace the sequester with a 10 per cent reduction in the federal workforce. But party leaders have not agreed on any proposal, virtually guaranteeing that the $1.2tn sequester will, at least temporarily, hit this year's budgets on March 1. Chris Krueger, an analyst at Guggenheim Partners, said he believed there was a 50 per cent chance the White House and Republicans would agree to a measure by the end of March that would "soften the blow" of the sequester by using pension reform or "other accounting shenanigans" to raise some revenue. "Once the pain of sequester begins and constituents begin to complain, politicians tend to bend quickly," Mr Krueger said. Despite a growing chorus of protests from Republican defence hawks, such as Senator John McCain, and Democrats who also oppose spending cuts, there are powerful forces pushing Republicans to hold a tough line. Americans for Prosperity, the influential activist group that is backed by the conservative Koch brothers among others, is launching a "grassroots" campaign in favour of sequestration in key House districts next week. Tim Phillips, the Americans for Prosperity chief, told the Financial Times that the lobbying push would single out House lawmakers who are committed to the sequester and "thank them ahead of time," and put pressure on others to follow through on the spending cuts. In other districts where Republicans are more wobbly, we'll be putting more traditional grassroots pressure on them. Our message is straightforward: keep your word," Mr Phillips says. "We're getting ready to hold the Republicans" feet to the fire." Groups such as Americans for Prosperity and the Club for Growth, another anti-tax organisation, gave Republican lawmakers a pass to extend the debt limit last month in part because they saw the fight over sequestration as winnable - and ultimately more meaningful. Reducing the size of government is their most immediate goal. Mr Phillips played down warnings from the Pentagon and others that the cuts would hurt the economy. Every time someone mentions reining in government spending, the horror stories and the implied threats begin. "It is so predictable," he added, saying the cuts were simply a "baseline effort" and were "not draconian."