Saturday, November 1st, 2014

The Obameter

Overhaul the corporate tax code and reduce the rate for manufacturing companies

"Reforming the corporate tax code to bring down tax rates on domestic manufacturers by nearly a quarter -- while closing tax preferences and loopholes to pay for it."


Updates

President proposed it in Chattanooga speech, though odds in Congress are long

President Barack Obama has often expressed frustration that his jobs proposals have been blocked by congressional Republicans. But that doesn't mean he's stopped trying.

During the 2012 campaign, Obama promised to bring down corporate tax rates on "domestic manufacturers by nearly a quarter -- while closing tax preferences and loopholes to pay for it."

Obama offered Republicans a "deal” during a speech in Chattanooga, Tenn., on July 30, 2013 -- a "deal that simplifies the tax code for our businesses and creates good jobs with good wages for middle-class folks who work at those businesses.”

The Chattanooga proposal addresses the promise we're rating here.

Under Obama's proposal, the top corporate tax rate would be cut from 35 percent to 28 percent. This would be revenue-neutral -- that is, bringing in the same amount of tax revenue -- by closing a variety of exemptions that savvy companies can now use to cut their effective tax rate well below the theoretical maximum of 35 percent.

In the meantime, Obama would also mandate a special tax rate for manufacturers of 25 percent.

"I'm willing to work with Republicans on reforming our corporate tax code, as long as we use the money from transitioning to a simpler tax system for a significant investment in creating middle-class jobs,” Obama said. "That's the deal.”

However, it's worth noting that the reaction of Republicans in Congress suggests that this proposal, at least in its current form, is not exactly on a glide-path to enactment.

Republicans dismissed the plan as a warmed-over proposal that had already gone nowhere in Congress. The GOP also showed little or no interest in accepting other provisions of the "deal,” such as a hike in the minimum wage and increased federal investment in clean energy and manufacturing.

The New York Times reported that "while the president presented the proposal as a concession, Republicans dismissed it more acidly than usual. ‘It's the opposite of a concession," said Brendan Buck, a spokesman for Speaker John A. Boehner of Ohio.”

So, Obama used a high-profile speech to propose a cut the statutory tax rate on manufacturers by one-quarter, to be paid for by closing tax preferences -- essentially, what he had promised during the 2012 campaign. It faces long odds to enactment, but it does represent a tangible effort to make good on his promise. We rate it In the Works.

Sources:

White House, remarks by the president in Chattanooga, Tenn., July 30, 2013

White House, "Fact Sheet: A Better Bargain for the Middle Class: Jobs,” July 30, 2013

New York Times, "Obama Proposes Deal Over Taxes and Jobs,” July 30, 2013