The Obama Administration announced Wednesday that it would lower
the corporate tax rate from 35 percent to 28 percent in exchange for
manufacturing incentives and closed loopholes. The move is expected to raise
$250 million over 10 years and relocate jobs back to the United States. It’s
also a complicated political maneuver, as Obama is attempting to usurp the
job-creator narrative while forcing Republicans to defend profitable but
unpopular segments of the corporate world.
The standard income tax rate for corporations is currently
35 percent, the second highest in the world behind Japan; 28 percent would make
that rate the fourth highest. But Treasury Secretary Timothy Geithner argued
that the effective tax rate—the rate corporations actually pay after loopholes,
tax breaks, and all the rest—is significantly lower, in some cases zero.
(Kevin Drum has a quick
breakdown at Mother Jones,
arguing that while America’s standard corporate tax rate is one of the highest,
its effective tax rate is one of the lowest.)
While the administration’s proposal lowers the standard
rate, it raises the effective rate by closing tax loopholes, which Obama has
argued are the results of large corporations using lawyers and lobbyists to
game the tax system at the expense of…well, everybody else. The
administration is expected to go especially hard on tax breaks enjoyed by oil
and gas companies,
Obama also proposed a minimum tax on multinational
corporations based in the U.S., while offering tax incentives for manufacturing
companies who create jobs in the States, attempts to make good on Obama’s State
of the Union criticism of corporations that are rewarded by low tax rates for
shipping jobs overseas.
These proposals coincide nicely with Obama’s election year
us-v-them populism. Obama can now claim to have lowered the corporate tax rate
“for the first time in 25 years,” while supporting at-home job creation in
popular industries like manufacturing, all while daring the eventual Republican
nominee to argue against his deletion of tax loopholes by defending the
despicably profitable and relatively unpopular oil and gas industries.
Over at the Plum Line, Greg
Sargent points that Republicans don’t have many options beyond “arguing that we
need to cut corporate taxes far more deeply than Obama is proposing.” James
Pethokoukis was happy
to oblige on that front; meanwhile, as of this writing, neither the National Review nor the Weekly Standard have even acknowledged
that the announcement was made. No matter what they eventually come up with,
the Obama-as-socialist narrative, which was always a bankrupt criticism, may
finally have to be laid to rest.
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