A Grand Bargain To Nowhere

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Obama’s proposal to cut the corporate tax rate if Republicans get behind his jobs and infrastructure programs seems to be dead in the water. In a truly hackish piece, Paul Ryan opines in USA Today that Obama is “interested in tax reform for corporations but not for families or small businesses,” while John McCormack reminds readers that “Obama’s push to lower the corporate tax rate to 28 percent comes less than a year after he raised the top individual income tax rate, paid by many small businesses, to 39.6 percent.” Meanwhile, business groups like the idea of tax cuts but object to the infrastructure spending.

Jared Bernstein is exasperated by the Republican response:

So, reviewing: we’ve got a big drop in the corporate rate that doesn’t add to the deficit, for which the Republicans have only to swallow a paid-for jobs program in areas they’ve historically supported. And what’s the response? From the spokesman for the House speaker, Representative John Boehner: “This proposal allows President Obama to support President Obama’s position on taxes and President Obama’s position on spending, while leaving small businesses and American families behind.”

I know, we’re in an upside-down world, but given how hard Republicans have fought for a lower corporate rate, the absence of accountability is particularly striking in this example. At this point, I truly wonder that if he finally gave in and offered to repeal Obamacare, they’d fight to implement it tomorrow.

Josh Barro pushes back:

[Obama] ended up proposing what amounts to a small corporate tax increase to pay for a small infrastructure program. This has been missed in much of the news coverage, particularly on television: Obama has called for a corporate tax rate cut, but he says that should come with enough base broadening to fully offset any revenue loss in the long term, and more than offset it in the short term. Liberals are, for some reason, expressing surprise that conservatives aren’t interested in this idea.

But couldn’t they refine it so that it is revenue-neutral? You know: actually negotiate a deal that would give both sides something? Howard Gleckman adds:

We remain stuck in the same Groundhog Day rut that has bedeviled tax reform – individual or corporate – throughout the Obama Administration. Obama and the Democrats won’t support reform unless it produces revenue to fund new spending and/or deficit reduction. Republicans won’t support it if it does increase revenue. So there we are.

But in that equation, the Democrats are clearly more willing to compromise than the GOP is. Alec MacGillis – who just a few weeks ago urged Obama to revamp the corporate tax code – says the administration’s plan is too vague:

As Obama has proposed before, the plan calls for lowering the corporate tax rate from 35 to 28 percent and making up the lost revenue by eliminating or reducing many of the credits and deductions that businesses use to get their rates far below 35 percent today. But the plan does not specify which of those credits and incentives it would target above all, and by how much – whether the depreciation credit for capital investments, the treatment of interest, etc.

It [also] promises simplification and investment incentives for small businesses, but does not reckon explicitly with the biggest objection to this general reform approach that we’ll hear from the executives at the many businesses (including some quite large ones) that now organize themselves as limited liability companies and “S-corps” rather than corporations and are thereby taxed at their owners and partners’ individual tax rates rather than corporate ones: that they’ll get hit with the loss of credits and incentives while not being able to benefit from the lower rates.

Rachel Weiner, who calls the proposal “basically DOA,” says Obama may not have expected the deal to catch on in the first place:

The White House can’t be expecting the House GOP to suddenly cave. They’re trying to do a couple of things. First, expand the idea of a “grand bargain” to mean not just deficit reform but any sort of economic agreement, and challenge Republicans to come up with a counteroffer. Second, try to win support from the business community for a proposal that contains two things they want: tax reform and domestic investments. Most of all, Obama is simply making clear that tax reform is one of his priorities, as Ronald Reagan did in his second term.

(Photo: US President Barack Obama speaks on job growth following a tour of an Amazon fulfillment center on July 30, 2013 in Chattanooga, Tennessee. By Mandel Ngan/AFP/Getty Images.)