Obama: Cut corporate tax rate to 28% – but ensure they pay more than before

I guess this is the political game. Reach out and let everyone know you’re going to lower the corporate tax rate from 35 percent to 28 percent, but then close all the “loopholes” – in other words eliminate deductions for many expenses – to ensure the overall tax burden of corporations goes up.

Certainly, few if any corporations actually pay the full 35 percent rate, but it does not matter. I read the current average was something like 12 percent. If the average rate for corporations goes up, that’s not a tax cut. What matters here is the president is trying to claim he’s going to reduce the corporate tax burden to stimulate the economy. But it’s all smoke and mirrors if corporations actually end up paying more in tax and their are fewer companies to collect from. From the New York Times this morning.

President Obama will ask Congress to scrub the corporate tax code of dozens of loopholes and subsidies to reduce the top rate to 28 percent, down from 35 percent, while giving preferences to manufacturers that would set their maximum effective rate at 25 percent, a senior administration official said on Tuesday.

I guess “manufactures” will be the winners for this round of tax policy. Sounds good does it not? On to the next paragraph, with my emphasis in bold.

Mr. Obama also would establish a minimum tax on multinational corporations’ foreign earnings, the official said, to discourage “accounting games to shift profits abroad” or actual relocation of production overseas.

That would be a tax hike on corporations, and it’s not just a tax hike, it’s a completely new tax. I got a kick out of this…

[T]he administration and Congress would have a political and mathematical challenge in eliminating or reducing tax breaks enough to lower corporate rates as they propose to do without adding to deficits. Underscoring the difficulty, just two popular tax breaks — for accelerated depreciation of businesses’ capital investments and write-offs of research and experimentation costs — account for the bulk of the revenue the government foregoes to benefit corporations.

My emphasis added. You see, it’s the government’s money, they have the power to let you keep it.

As I read the above, I want to make it clear I think a reduction in tax rates can and does increase the revenue to the government. But federal revenue is not our current problem, spending is what is out of control and our economy is anemic with high unemployment and high energy costs.

We need to get people back to work, and increasing the revenue collected from corporations will not encourage them to expand, hire and invest. We need to get more people and companies working, not increase the tax burden on those who are working now.

In other words…

  1. Drastically reduce the role of the federal government in our lives and dramatically cut the federal budget. (I’m talking cuts much more than $1 trillion in cuts.) Then…
  2. Lower the overall tax burden to companies and people to dramatically increase the participation rate. Companies should want to do business not only with America, but in America.
  3. Keep cutting federal spending and lower federal taxes accordingly.
  4. Increase tax rates at the state and local level – if necessary – to fund public programs and projects with zero involvement from the federal government.
7 replies
    • Eric
      Eric says:

      I think it’s all of the above. ?Liberals are just like snakes in the grass. ?They don’t want to be seen doing the underhanded things that they’re known for doing, which is why they have to first create a smoke screen to keep people from seeing what’s really going on. ?

  1. Shock and Awe
    Shock and Awe says:

    We need to have a debate not based on what the current rates are but what truley is fair. Overall businesses pay to much in corporate taxes, but we cannot either ignore that G.E. pays no taxes. Just raising taxes on everyone wouldn’t be good, and just targeting G.E. would be seen as unfair. Same goes for taxes on individuals. So we must start from scratch.

  2. Plainvillian
    Plainvillian says:

    Corporations pay no taxes.? All taxes on corporations are passed on to the final buyer of the product.? Why is this so difficult to understand?? Do none of these politicians have the slightest understanding of basic business practice or economics?? Finally, forget “Fair”, how about “Equatable”?

    • Dimsdale
      Dimsdale says:

      You can’t do class warfare with an “you are ultimately paying for all of our largesse” argument.? 😉

  3. Lynn
    Lynn says:

    I am hopeless on economic issues and taxes.? I started to shake my head and give up reading this. Then thankfully, you said something I understood. “But federal revenue is not our current problem, SPENDING is what is out of control….”? WOW, how simple, but totally beyond the reasoning of MOST members from both sides of the aisle in Congress. We might be rescued by the Tea Party, but they have a huge job ahead of them. We need to send a majority of Tea Party members, to save us from anymore red ink.

  4. jcsullivan
    jcsullivan says:

    Applying US taxes to US companies foreign income will be disasterous. The reality of the situation is counter to what appears obvious. Currently US Corporations do not pay any US tax on foreing income until they bring the CASH back to the US. The reason for this is if they had to pay both US and the foreign countries taxes they would be at a disadvantage. Because they will have to pay both countries taxes on any money brought back to the US most companies don’t. That is one reason more factories are going overseas. If a company needs a new factory and has cash overseas why wouldn’t they just spend the money to build the factory in a foreign country rather than pay 35% or more ?of their avialable funds in US taxes to bring the money home and build it here. If we start taxing US companies for the foreign income the simple solution would be for them to no longer be US companies and move their headquarters out of the country.

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