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Obama's Corporate Tax Plan Presages Election Debate

Obama's Corporate Tax Plan Presages Election Debate

By Alexis Simendinger - February 23, 2012


President Obama's corporate tax reform "framework" unveiled Wednesday is unlikely to become law in an election year, but a partisan and economically rooted debate about individual and business taxes will figure prominently before November.

Two competing visions for fiscal rejuvenation after 2013 are guaranteed to clash when Obama and a GOP nominee finally face one another later this year.

Treasury Secretary Tim Geithner was so certain of the oncoming collision that he decided Wednesday to highlight its inevitability as he explained Obama’s aims for corporate tax changes.

Geithner will meet with the chairmen of the House and Senate tax-writing committees, possibly next week, to discuss the president’s desire to lower the corporate tax rate to 28 percent from 35 percent; create a new minimum tax on earnings abroad to encourage business investment at home; end certain preferences and loopholes, such as those for the oil and gas industries; place a 25 percent effective tax rate cap on manufacturing; and match the revenue raisers against the reduced taxes to make any corporate tax package deficit-neutral.

For instance, the costs of business tax provisions that Congress and the president add to the deficit each year cost about $250 billion over a decade. Enacting tax reform, the administration argued, could gin up enough new revenues to offset that $250 billion to make permanent tax provisions that corporations want to know will be in place year after year.

“This process will take time,” Geithner told a room full of reporters at the Treasury Department. “It will be politically contentious. Some are going to say these proposals are too tough on business, and others will say that they’re not tough enough. . . . These proposals are designed to begin the process of building bipartisan consensus on a better growth strategy for the long term.”

As it happened, Mitt Romney, campaigning in Arizona before participating in last night’s CNN debate, also chose Wednesday to unveil select details from his tax plan to cut marginal rates by 20 percent across the board. Romney had already been scheduled to deliver an economic speech Friday at the Detroit Economic Club, at which he is expected to expand on his ideas. In September, Romney rolled out his economic plan in a 160-page book that included 59 policy prescriptions.

A 2012 debate about taxes began to take shape last summer, when Obama and congressional Republicans went three rounds over whether to raise taxes to get new revenues for both investment spending now, and deficit reduction over 10 years. House Speaker John Boehner and other Republican lawmakers balked at raising taxes without fundamental tax “reform,” and insisted on spending cuts elsewhere in the budget.

Those cuts -- $1.2 trillion -- will be triggered with a blunt-force machete after December if Congress lets current law proceed. Specifically how to wrestle with the tax code (beyond the payroll tax holiday, which was extended by Congress through 2012 and signed by Obama on Wednesday) is now grist for the campaign mill. The Bush-era tax cuts are slated to expire this year, pitting Obama’s support for the middle class against the existing tax breaks for those earning more than $250,000 a year -- benefits Republicans would like to retain. In other words, big tax decisions loom, whether this year or later.

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Alexis Simendinger covers the White House for RealClearPolitics. She can be reached at asimendinger@realclearpolitics.com. Follow her on Twitter @ASimendinger.

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