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…
- 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…
- 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.
- Keep cutting federal spending and lower federal taxes accordingly.
- Increase tax rates at the state and local level – if necessary – to fund public programs and projects with zero involvement from the federal government.
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