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.
