Today President Obama announced his latest, and arguably first non-Stimulus laden, economic plan. The concept is not new, a reduction in corporate tax rates to allow America to become more comparative versus the rest of the world economies. But what is striking is how this proposal, in combination with previous proposals, is so politically motivated.
President Obama, in announcing that he intends to cut the corporate tax rate to 28%, and 25% for manufacturers, has hopped on a bandwagon of reform that his Republican challengers have been touting – to great public support – since 2011. Prior to this announcement, President Obama seemed to hold a view that the “rich” and corporation were not paying their fair share of taxes, and that increases in the tax rates would be needed. This was the reasoning for his push for the so-called “Buffett Rule” mentioned in the 2012 State of the Union Address.
President Obama has not hidden his thoughts that the wealthy must be forced to pay more in taxes. He has fought, since being elected, to end the Bush tax cuts. He has proposed increases in taxes on those making $100,000 or more (depending on whether it was the 2008 campaign trail, or higher incomes once elected) which matched his voting record as a Senator.
This is something that is highly valued with the Left. It is a theme that Democrats have pushed hard, and have sold repeatedly to the American people for decades. But it is a position that has not improved the economy, reduced the national debt, nor is it likely to help win the 2012 re-election.
Thus President Obama, after 3 years of maintaining the extremely high corporate tax levels of the nation [7th in the world as of 2005] – through a recession that President Obama claimed was on the verge of becoming a depression – suddenly has taken a reversal of thought. Only as his prospects in the 2012 election remain dim, has he moved to the center-right and offered a plan that in many ways mirrors what Republicans have been saying throughout his presidency.
It is essentially a ploy to garner votes from Independents that can still be swayed by the eloquent speaking abilities of the President. For it to be taken as more than a re-election tool, we would have expected it to have been proposed in 2010, or even 2011.
What it leaves the President with is a very confusing outlook on America, corporations, and the economy.
On the one hand, President Obama is stating that the wealthy, which includes small business owners and those that have successfully made investments over decades, must pay more than the majority of tax that is paid annually already. The top 20% of incomes paid 68% of all taxes , with estimates for 2011 that 46.7% of the nation won’t pay taxes at all leaving the burden again on the “rich”. But that is not enough. Especially as President Obama spends more money, and increases the national debt, faster than every President Before him – combined.
On the other hand, President Obama is stating that corporations, large multi-national businesses, pay too much in taxes. That in reducing the corporate tax rate there will be more jobs, and economic growth. In addition, corporations will be penalized for doing business overseas as that portion of their taxes will be increased. Lastly, President Obama plans to reform the corporate tax code – for SOME corporations.
The proposed tax cut will require many subsidies and loopholes to be removed. But at the same time it will guarantee certain industries – supported by Democrats and the Left – will maintain their subsidies. In particular, “Green” energy companies will remain among the companies that will be subsidized by the Government even at these lower tax rates.
Obama’s tax framework also calls for making permanent the production tax credit for renewable energy, which is set to expire at the end of the year…
A process of picking winners in private business that has resulted in the past with such successes as the VOLT electric car (total 1 year sales were for 7071 cars excluding fleet sales) and Solyndra among others.
So beyond a 30 second soundbite that corporate taxes are going down, and that the “rich” are going to pay more than their fair share, what is the result?
According to Steve Forbes, editor of Forbes Magazine,
“You see it in terms of taxing overseas earnings which would be devastating to this global economy, reducing deductibility of interest, trying to put taxes on S-Corps and limited liability corporations which would devastate small businesses, playing games with the oil industry and the aircraft industry, going after life insurance, trying to make deductibility of terms of investments less by giving a premium to inflation. I mean you go down the list and it’s a house of horrors.
The reality is that President Obama is betting on the positive press he has received, before he was even elected and continuing overwhelmingly, to obscure the fact that cutting corporate tax rates is economicaly required to maintain America’s competitiveness in the global markets and that such a realization was a Republican concept.
We would like to see MSNBC, or NBC, or NY Times (which all seem to be favored by the Obama Administration) ask the following question:
‘Mr President, if you believe that a small business owner with 15 employees or less making $250,000 a year does not pay his fair share in taxes, why are you cutting the tax rate of multi-billion dollar global corporations like GE, who avoided paying taxes at all in 2010 and shipped jobs to China?’
That’s the problem with what President Obama is proposing. Either taxes need to increase to pay for all the spending he has done, and the bulk of the burden must be on the very people responsible for job creation and growth, or taxes are too high and are restricting job growth and creation. Taking both sides of the issue is just playing for votes and infers that one of the 2 positions are a lie. We would suggest a review of President Obama voting record in Congress if there is any question which proposal is meant as a cheap way to get re-election votes.
Will anyone in the major media ask this simple and blatantly obvious question? Probably not from any news organization that President Obama is willingly and readily going to speak to.
But at the very least voters should take the pound of salt this is presented with. IF President Obama really wanted to cut corporate tax rates, he would have at least hinted at it in the State of the Union Address. He has had 3 years in office, with a supermajority of Democrats for a year, to offer this proposal. Instead, at every turn, he has insisted that Americans pay more money – even though neither he nor Mr. Buffett, who complains so much about how much he is taxed, have paid a single voluntary dime to the IRS.
Thus, after the 2012 Presidential election, if President Obama were to win what do you think is more likely. That he would increase taxes as he has tried to do since before he was President, or that he would cut corporate tax rates? Or both at the same time? Forget the soundbite and think about it.