This story is based on two articles–one posted in Investor’s Business Daily yesterday and one posted in the Wall Street Journal today. Both articles deal with President Obama’s proposed “grand bargain” on tax reform.
Yesterday in Chattanooga, Tennessee, President Obama offered to cut taxes for corporations in return for increasing government spending. (I believe he calls it “investment.”)
The Wall Street Journal reports:
Mr. Obama will agree to reform the corporate tax code—a GOP priority and one even the President claims to support—but only if the reform raises more revenue and only if he is allowed to spend that windfall on his priorities.
A White House press release clarified that the President would also like to raise taxes on individuals, not just businesses, while allowing federal spending to rise still higher. But showing they retain a sense of humor in the West Wing, the press release suggests that the President is willing to forgo this tax increase for now because he wants to “work with Republicans.”
Investor’s Business Daily reports:
Since Obama’s “stimulus” took effect, job growth has been subpar, GDP gains are at record lows, median incomes have shrunk and the number of Americans on welfare has surged.
So we know that won’t work. But what about corporate tax cuts?
The nonpartisan Tax Foundation reckons a simple cut in the corporate tax rate to 25% would boost GDP more than 2% and wages by nearly as much. And capital investment would jump more than 6%.
Moreover, a corporate cut would increase federal revenues and help lower our deficits — assuming, that is, Obama doesn’t spend the new money.
Unfortunately, part of Obama’s “bargain” is to increase taxes on U.S. companies that operate abroad and to reduce business writeoffs for investments — the seed corn of future economic growth.
Even at 28%, Obama’s new tax rate would be higher than the 25% average paid by our main competitors.
So with one hand the president giveth, and with the other he taketh away. Worse, he seems intent on rewarding big companies with tax cuts while punishing small companies that account for 85% of all new jobs.
So what is going on here? The President wants to continue the tax and spend policies the Democrat party is known for while claiming to support tax reform and lower tax rates for corporations. Those tax and spend policies are what is causing the slow growth of the economy and also what got us into the fiscal mess we find ourselves in. However, depending on how the mainstream media reports this, the low-information voters may wonder why the Republicans won’t compromise. There is no compromise being offered here, but the media will probably neglect to mention that fact.
This proposal will kill any economic growth we may have in the near future. Hopefully the Republicans will not be drawn into the trap.