President Barack Obama is taking yet another run at a grand bargain with Congress, conjuring images of Peanuts, in which Lucy invites Charlie Brown to kick the football, then pulls it away at the last second. The question is: Who’s Lucy and who’s Charlie Brown?
Obama traveled to an Amazon.com Inc. distribution center in Chattanooga, Tenn., to propose cuts in corporate taxes in exchange for increases in education and job-creation spendingSome Republicans are openly laughing at it.
That said – and because ideas deserve to be assessed on their merits – do Obama’s proposals make sense?
The president would cut corporate taxes to 28 percent from 35 percent, with a rate of 25 percent for manufacturers. He would tap about $2 trillion in untaxed offshore earnings.
The president would also close loopholes that benefit special interests, including the oil-and-gas industry and private-equity firms. And entrepreneurs would get quicker write-offs on as much as $1 million in new investments.
Obama would pair all of that – which would happily produce a one-time windfall in tax revenue – with increased spending on highways, bridges and transit systems, dozens of new manufacturing institutes and community college job-retraining programs.
All of this is good as far as it goes. The president could have been more specific about the rate at which he would tax overseas income. He could also have supported a territorial tax system, in which corporate earnings are taxed in the country where they are earned. Almost all other advanced countries have adopted this, leaving U.S. companies at a disadvantage.
As for the politics – well, it’s complicated. By calling for a cut in corporate taxes, and by paying for new spending with loophole-closing, Obama is borrowing Republican anti-tax, anti-deficit, anti-corporate-welfare rhetoric. It also helps that Rep. Dave Camp, the Michigan Republican who heads the House Ways and Means Committee, has been traveling with his Senate counterpart, Democratic Sen. Max Baucus of Montana, to promote tax reform.
It’s not hard to see Obama’s strategy: With its cuts in tax rates and narrowed loopholes, the plan is designed to appeal to a wide swath of corporate America, the small-business lobby and a large number of congressional Republicans. And with its increases in public-works spending, the plan appeals to organized labor, the U.S. Chamber of Commerce and a large number of Democrats who support more stimulus spending.
And yet. Many Republicans don’t like any tax reform that isn’t revenue neutral. Gene Sperling, director of the National Economic Council, says the windfall isn’t large or lasting enough to sustain deeper rate cuts. For the long term, he says, the president favors legislation that is revenue neutral. Until the administration provides more detail, Republicans are unlikely to take him at his word.
The danger, of course, is that neither congressional Republicans nor the White House trust each other. Both suspect the other is planning to pull the football away once their opponent commits. If that’s the case, this speech is destined to become just another panel in an endless Peanuts cartoon strip – with the public playing the role of Charlie Brown.