Obama Administration Proposes Corporate Tax Overhaul Based on Theory That Loopholes Are Bad and Should Be Replaced With Different Loopholes

Today, the White House will release a proposal to overhaul the corporate tax code, reducing the top corporate tax rate, currently the second highest amongst developed economies, from 35 percent to 28 percent. The potential gain against international competitors, however, would likely be small: According to Jim Pethokoukis, the new plan would probably leave the U.S. with the fourth highest corporate tax rate.

Despite the lower rate, meanwhile, the plan is expected to raise the total amount of corporate taxes collected (or at least be revenue neutral, depending on how exactly one makes the calculation).

How will this be accomplished? President Obama has long offered rhetorical support for the idea of getting rid of "special interest loopholes" in exchange for lower overall rates. And as The Washington Post notes, Treasury Secretary Timothy Geithner previewed the theory behind the plan in congressional testimony last week, saying “We are going to propose a broad reform that will lower rates, broaden the base and eliminate and wipe out a very substantial fraction, dozens and dozens and dozens of special tax preferences for businesses...We’re doing that because we think there’s a compelling economic case for doing that.” The economic case is apparently not so compelling, however, that the Obama administration is willing to avoid adding new  “special tax preferences” for favored industries. The Post reports that “Obama will target oil and gas companies for tax hikes while promising special breaks for manufacturing companies.” 

So the Obama administration’s proposal to reform the corporate tax code is a tax cut that will probably result in a net tax hike, and a tax simplification that will include the creation of new loopholes. 

Earlier this month, Jacob Sullum caught Obama condemning tax carve outs while calling for more. 

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  • ||

    Bloomberg, surprisingly enough, was just doing a segment about "effective" vs "statutory" rates, by industry categories.

    Guess what, Silicon Valley; your taxes are headed up.

    Aren't you glad you shoved all that money at your enlightened hero?

  • goo||

    Bi-curious? -Datebi*cO'Mis designed for bisexual and bi-curious individuals to meet in a friendly and comfortable environment. It hopes that all members can make new friends and establish romantic relationships.

  • Colonel_Angus||

    If you're going to tax teh corporashuns, just fucking tax them all the same. Wouldn't that save some overhead?

  • ||

    Your "overhead" is the primary source of graft, rent-seeking, and influence-peddling to Our Masters. And they are not in the business of reducing any of that.

  • Invisible Finger||

    Duh! Government IS overhead!

  • rather ||

    Chris Christie told Warren Buffett to write a check and Shut Up.

    Too bad he didn't tell him to pay up on his loophole write-offs

  • Colonel_Angus||

    http://money.cnn.com/2012/02/2.....?iid=HP_LN

    Buffet's loopholes are possible because people like him are able to influence tax policy to their favor. Buffet benefits greatly with his "altruistic" concerns.

  • Anonymous Coward||

    Chris Christie is one of the handful of New Joisyites I would not like to throw off of a bridge.

  • ||

    Buffett wants himself and people that make as much money as him to pay more taxes.

    How would his sending the IRS a check help with that goal? You expect the guy to lead by example? What would that accomplish?

    A libertarian making appeals to some inherent nobility in capitalists is absolutely absurd.

    Plus, tu quoque. Warren can exploit as many loopholes as he likes - he will still be correct in saying loopholes have to be closed so corporations can't pay legal wranglers (that would otherwise be useless to society) to escape taxation. His not leading by example doesn't hurt his case.

  • ||

    "eliminate and wipe out"

    Timmah Da Man.

  • shrike||

    OK, cutting tax rates is anti-Libertarian because to do so is recognizing that tax rates exist. So the Libertarian thing to do is NOT cut the rate and complain about taxes every day.

    See, I AM learning to think like a libertarian.

  • Colonel_Angus||

    Fucking around with tax policy is not libertarian when it still allows the government to pick winners. Cutting tax rates is libertarian when all rates are the same.

  • Almanian||

    Shriek's name will get called when the gummint updats its list of "whiners and losers".

  • shrike||

    So you agree that labor and capital income should be taxed at the same rate then to avoid picking winners? Good. Join Buffett in telling the Fat NJ bastard to fuck himself.

  • anon||

    So you agree that labor and capital income should be taxed at the same rate then to avoid picking winners?

    I do. And that rate should be zero.

  • Colonel_Angus||

    Buffet favors progressive income taxation, not an absolute flat rate. And he loves tax breaks, subsidies, and regulation that manipulate the market. His "altruism" is entirely about getting the government to do him more favors. So he can go fuck himself.

  • Almanian||

    CAPTION

    "President Obama's team of advisors re-enact Dana Carvey's impression of George HW Bush identifying 'the beautiful middle class' as the source of tax revenue for the Federal Government..."

  • Brian||

    Is the number of loop holes at least going down? or is there some sort of conservation law of tax breaks that forbids this?

  • anon||

    I think the Federal Government is the only entity found so far that breaks the 2nd law of thermodynamics.

  • ||

    Are their irony indicators off, or permanently removed?

  • ||

    So you agree that labor and capital income should be taxed at the same rate then to avoid picking winners? Good. Join Buffett in telling the Fat NJ bastard to fuck himself.

    Wait, what?

    Generally speaking, when the vehicle leaves the pavement you should take your foot off the gas.

  • el Commentariosa||

    unless your car suffers from violent understeering.

  • ||

    Wrong thinking is punishable. Right thinking will be as quickly rewarded. You will find it an effective combination.

  • Pavlov||

    See, I told you that you're just like my dogs.

  • stuartl||

    Maybe I just haven't clicked through to the right links, but why do these stories never include what loopholes are being closed and what the new ones are?

    Is this typical Obama, no specifics so he can't be criticized, and then Congress gets the blame for not doing anything because the nuts and bolt are difficult politically?

  • anon||

    This is stupid and will never be passed in an election year. So much for everyone to hate.

  • Loki||

    Loopholes for oil companies = BAD
    Loopholes for manufacturing (and any other kind of company the King favors) = GOOD

    What a putz.

  • Wesley||

    As a Texan, it feels like everything that Obama proposes is an attack against my state. Oil companies have the least favorable tax structure of all except maybe Tobacco companies, and yet Obama wants to hit them with more corporate taxes. Sure, oil companies take advantage of a lot of loopholes, but they are almost all loopholes that are available to all corporations. Manufacturing has among the most specific carve-outs (maybe banking has more), but they need more. It seems to be a purely rust belt vs. Texas battle.

  • anon||

    I wouldn't worry too much about the O&G industry just yet. Actually ending the tax breaks for O&G (especially asset depreciation) is a lot more complicated from a technical tax perspective than people imagine. There is an unreal amount of money tied up in financing deals involving major Obama supporters (esp. Goldman and JPM) that would collapse if the tax structures for these companies changed. It will not happen.

  • anon||

    A complicated tax code benefits only politicians, which is why it will never change without constitutional amendment level support from the people.

  • Cowboy||

    Remember: the "Bush" tax cuts for the rich destroyed our economy. So following that same line of reasoning, wouldn't cutting taxes on TEH CORPORASHUNS be even worse?

  • GILMORE||

    So the Obama administration’s proposal to reform the corporate tax code is a tax cut that will probably result in a net tax hike

    I am shocked, shocked!

    Next thing you know he'll like, 'end a war' without actually ending the war... they'll just say they aren't in 'major combat operations' anymore. Or maybe they'll try and 'create jobs'.... then say they 'saved' some instead?! At least he never wields extra-constitutional executive authority like that Evil Bush guy! I think Bush actually had an American citizen assassinated! Also, he's different than Evil Bush, because Evil Bush connived with Energy companies like Halliburton... Obama never would never do things like give his buddies free loans and tax breaks! Thats evil GOP stuff! Obama's gonna clean the environment with magic solar power and stop the global warming that the scientist Dr Al Gore discovered.

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