Would Obama's corporate tax cut speed the recovery?
On Wednesday, President Obama proposed cutting the U.S. corporate tax rate from 35 percent to 28 percent. But the administration insists that this wouldn't deplete federal coffers. Instead, the plan would actually generate more revenue for the federal government, because Obama wants to eliminate loopholes and subsidies that allow many corporations to pay a lot less than 35 percent, and in some cases, zero. Obama is also proposing a minimum tax on foreign earnings. Is this sensible, overdue reform, or a recovery-killing tax hike in disguise?
The proposal would doom the recovery: "This is a terrible, terrible plan," says James Pethokoukis at The American. The stagnant economic recovery is already "arguably the worst in modern American history," and instead of giving corporate America a hand, Obama now wants to saddle companies with so-called reform that would "actually raise the tax burden on American business by $250 billion over a decade." That would make us less competitive than ever, and doom our chances of bouncing back anytime soon.
"Why Obama's corporate tax plan is a total bust"
It's a step in the right direction: Obama's proposal "is a helpful start to the much-needed discussion about how best to reform the corporate tax code," Maya MacGuineas, president of the Committee for a Responsible Federal Budget, tells Reuters. But if anything, it doesn't go far enough. What the U.S. really needs is comprehensive reform of the corporate and individual tax codes at the same time. "That would be a real boost to the economy."
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Obama's plan won't affect the economy much either way: U.S. corporate profits have already "rebounded to their pre-recession heights," says Pat Garofolo at ThinkProgress. And despite all of the whining from the Right, the tax rate that U.S. companies actually pay is the second lowest in the world. That helps explain why our corporate tax haul is at a 40-year low. But because Obama's plan doesn't aim for a truly significant revenue increases, it won't make much difference at all.
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Face it — this proposal is all about the election: "There's little chance... that this tax reform proposal will make it through Congress," says Norah O'Donnell at CBS News, which means Obama's plan will have no impact whatsoever on the economy. But it will play a role in the presidential election. Leading GOP candidate Mitt Romney unveils his own economic plan this week, and Obama is itching to start an election-year debate in which he's the one who looks like a tax cutter and reformer.
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