Robert Reich - Corporations Don't Need a Tax Cut, So Why Is Obama Proposing One?

[paulk]

'And it's not as if corporate taxes are high. In fact, corporate tax receipts as a share of profits is now at its lowest level in at least 40 years. According to the Congressional Budget Office, corporate federal taxes paid last year dropped to 12.1 percent of profits earned from activities within the United States. That's a gigantic drop from the 25.6 percent, on average, that corporations paid from 1987 to 2008.

And it's not that corporations are paying an inordinate share of federal tax revenues. Here again, the reality is just the opposite. Corporate taxes have plummeted as a share of total federal revenues. In 1953, under President Dwight Eisenhower, a Republican, corporate taxes accounted for 32 percent of total federal tax revenues. Now they're only 10 percent.

The administration's initiative doesn't even make sense as a bargaining maneuver.

Republicans will just accept the administration's lower corporate tax rate without closing any tax loopholes. House Republicans have already made it clear that, to them, closing a tax loophole is tantamount to raising taxes. And corporate lobbyists in Washington know better than anyone how to hold tight to loopholes they've already got.

Big business will fight to keep their foreign tax shelters. After all, it's almost impossible to distinguish between their foreign and domestic earnings, which is why the U.S. Chamber of Commerce and other business lobbies have spent the past three years trying to make it even easier for companies to defer U.S. taxes on income they supposedly earn outside the country."

full article here -

http://www.huffingtonpost.com/robert-reich/obama-corporate-tax_b_1294224.html

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I have to agree with Mr Reich on this...

Perhaps someone could explain the rationale? It seems that Obama has, once again, played his bargaining chips before the cards are even dealt. I truly don't understand.

[antigop]

1. What's not to understand? The corporations rule the country. It's called fascism. n/t

[hifiguy]

2. Look at a list of his campaign contributors

and the answer will be yours.

[ProSense]

3. Reich

makes a couple of interesting points:

The move is supposed to be “revenue neutral” – meaning the Administration is also proposing to close assorted corporate tax loopholes to offset the lost revenues. One such loophole allows corporations to park their earnings overseas where taxes are lower...According to the Congressional Budget Office, corporate federal taxes paid last year dropped to 12.1 percent of profits earned from activities within the United States. That’s a gigantic drop from the 25.6 percent, on average, that corporations paid from 1987 to 2008...Republicans will just accept the Administration’s lower corporate tax rate without closing any tax loopholes.

First, the notion that this should be “revenue neutral” is puzzling. There are corporations paying zero income tax so with strong enforcement and closing the loopholes this should result in more revenues.

30 Major Corporations Paid No Income Taxes In The Last Three Years, While Making $160 Billion
http://thinkprogress.org/economy/2011/11/03/360185/30-corporations-no-taxes/

I mean, only about three industries are paying above 28 percent, and most are paying less than 20 percent, which is why revenue is down to an average 12.1 percent from 25.6.



Congressional Democrats should ensure that all the criteria are met: closing the loopholes, strengthening enforcement and increasing revenue.

[rudycantfail]

5. His most interesting point is

why not just close the loopholes?

[ProSense]

8. I'm

"His most interesting point is why not just close the loopholes?"

...sure Reich knows that's been proposed over and over. So this is just another proposal. He's definitely right about one thing: Congressional Republicans are going to balk.

The interesting thing would be if any of this happens.

[rhett o rick]

11. What a great campaign issue. The Pres proposed to help the budget by closing loop-holes.

If the R-cons balk, then there is your campaign issue. R-cons favor keeping loop-holes.

Why would he make this revenue neutral?

He should start off from a position of both closing loop-holes AND raising the tax rate and settle for either.

[Robb]

19. You're only talking about 2 of 3 parts here.

The "revenue neutral" part excludes the huge number that would come from even a tiny tax on foreign earnings.

The Ireland-Holland 2-step would be a thing of the past. A piece of that pie would make a lot of things "revenue neutral."

[stevenleser]

16. Yep. People need to look beyond the superficial soundbites. nt

[paulk]

20. what are the "superficial soundbites" you refer to?

please elaborate...

[stevenleser]

21. ProSense already did the elaborating. nt

[paulk]

25. just trying to start a conversation, Mr Leser

I thought an important journalist like yourself might have something to add.

[stevenleser]

52. It's really simple...

When corporations and the highest income earners pay taxes, the tax rate isn't as important right now as what they can write off. If what the President is proposing lowers the rate a few points but kills several important writeoffs, we're ahead. As ProSense points out, the saying is that it is revenue neutral. There is no way that is true. This is going to force corporations to pay more money. It's write-offs that cause several large corporations to pay zero in taxes.

Even better about what the President did is that the writeoffs that were killed involved a nasty incentive to offshore jobs.

[boxman15]

24. ^This.

JFK proposed something very similar in the 1960s, I believe. I'm fine with it, too, as long as corporations actually pay taxes.

I have a feeling this is also political bait. The GOP is going to balk, like you said. Now Obama is going to say, "Look, I tried to lower taxes on corporations like you've always wanted, but you wouldn't let me because I actually wanted them to pay them."

[rudycantfail]

4. Corporations will inevitably howl at the attempted loophole closings

while counting their new windfall and Obama's loyalists will point to this as proof that corporate America hates Obama.

[ProSense]

6. What

"Corporations will inevitably howl at the attempted loophole closings

while counting their new windfall and Obama's loyalists will point to this as proof that corporate America hates Obama."

...new "windfall"? The companies who are already paying zero dollars and collecting money from the government in the way of subsidies are already making out like bandits.

If they were forced to pay 28 percent that would be great!

[rudycantfail]

12. Do you

really believe that any companies paying zero dollars now are going to be forced to pay 28 percent with the new proposal?

[ProSense]

14. Well

"Do you really believe that any companies paying zero dollars now are going to be forced to pay 28 percent after this?"

...that's about as likely to happen as closing the loopholes. Closing the loopholes is good, but it will not raise enough revenue to make up for the decline.

[rudycantfail]

26. It depends

on which loopholes you close and how much you lower rates. Apparently JFK successfully increased revenue. A president has to believe in it and be willing to fight for it to have a chance. It would be so interesting if we had a president who used all of his powers of persuasion and launched a campaign to close all significant loopholes and give corporations a 2% reduction in taxes and see if an energized popular movement at this time would win out over corporate money and influence. How shredded would the GOP be if they won? What would it tell Americans about the state of their country?

[girl gone mad]

15. Just one problem with your little theory:

We're not stupid.

[ProSense]

17. I'm

Just one problem with your little theory:

We're not stupid.

...not convinced!

[mike_c]

7. because he works for the 1%....

Corporate tax rates are already at their lowest level in what? 50 years? And most corporations either pay no taxes anyway, or much reduced taxes-- the average is about 12 percent, if I'm not mistaken, so even the nominal 35 percent maximum rate is a fiction. None of the supposed benefits of low corporate taxes have EVER been realized, and with corporate taxes at historic lows and STILL no economic recovery for the middle and working classes, one would think that a rational person might recognize that the experiment with unbridled corporate capitalism has resoundingly failed. Yet Obama soldiers bravely on, slashing tax rates, creating jobs, and lifting all boats on a rising tide of corporate prosperity. Oh wait, that trickle down I feel isn't prosperity.

We're being pissed on.

[spanone]

9. they closed loopholes that encouraged co's to go overseas

robert knows he didn't just give it away

[whatchamacallit]

10. In magic it's called misdirection

and it's the core operating principle of this administration.

[sofa king]

51. Yep.

It's a tax hike, carefully woven into decades of public deception on the part of the GOP and corporations. Instead of revoking the tax code, they simply gnawed it full of enough holes to walk through, so that they can pretend they pay a fair share of taxes.

Now the President gets to say, "I want to lower taxes for corporations," but what he really means is "I want to raise taxes on some corporations by 28 percent."

That point is too subtle for Republican voters and independents, the people who swallowed "compassionate conservatism" hook, line and sinker. If the money Republicans want to try to change that perception, they need to address the fact that many of the corporations don't pay taxes at all now, which will damage them.

And of course the President gets to put another brick in the foundation of a campaign platform, being able to ask crowds, "why would a corporation oppose lowering their taxes unless they're not paying that much now?" Ouch.

[Spike89]

13. The risk is there, but

this is exactly what Obama promised to do...make it easier (more economical) for corporations to do business in the US while making it less attractive to outsource. Of course congress can foul it up. I guess the other option to get the same result is for Obama to propose higher taxes and more targetted deductions/loopholes to reward domestic investment, but what are the odds that congress is going to go along with that? In an election year you will find that the only option with any chance is the first.

Oh, I guess there is a third way...do nothing.

[dreamnightwind]

18. This country is starved for revenue

and Obama is proposing these changes that are designed to be revenue neutral. Ughhh.

Corporations are paying an historical low amount of our tax revenues relative to GDP. Obama should be trying to close the loopholes and RAISE the corporate tax rate.

Of course the Republicans wouldn't like it. To me, that's a reason to do it, not a reason to take it off the table. You take the stand, make the case loud and often to the public, who won't be hard to convince on this issue, and you use it to help distinguish yourself from the robber-baron positions of the Republicans in the upcoming election. And let the Occupy/99% movements drive the message home.

[Lydia Leftcoast]

22. The Republicans will claim:

"Corporations will just raise prices to cover their taxes."

They are counting on the fact that most people don't know how corporate taxes work.

Corporations are not taxed on their total earnings with a few paltry deductions, as individuals are.

No, corporations (and to a certain extent, even sole proprietors like myself) have a bazillion deductions (all legitimate business expenses and some that are fudged to look like legitimate business expenses), and they are taxed only on their PROFITS. If they can fiddle with their books to show no profit, they don't pay any tax.

That's how they avoid taxes: stupid accounting tricks.

Suppose corporate taxes were to go up. If the corporations raised their prices without also increasing their deductible business expenses, their taxes would go up even further.

One deductible business expense is employee wages, salaries, and benefits. That's right. Corporations can lower their taxes by hiring more people. Or developing new products. Or launching new advertising campaigns.

[paulk]

27. good point

having been involved in a sole proprietorship myself...

"One deductible business expense is employee wages, salaries, and benefits. That's right. Corporations can lower their taxes by hiring more people. Or developing new products. Or launching new advertising campaigns."


Corporate taxes are high because the government is trying to force the business to invest their profits back into the economy...

[Lydia Leftcoast]

47. Yes, once when it looked as if I'd underestimated my estimated tax...

I moved up the purchase of a new computer from January to December. Presto! Instant $1500 reduction in taxable income.

[Bruce Wayne]

23. Closing loopholes will bring most Corp. taxes UP TO 28%

Most pay far less.

[bluestate10]

39. Your stunning logic is lost on many at DU and on Reich.

Obama's proposal actually increases tax revenue by eliminating tax loopholes that see companies like oil companies paying little or no tax while earning billions. The tax proposals also favors companies that manufacture products on US shores.

[Bucky]

48. I don't think they're getting rid of ALL loopholes.

But I don't expect a fatcat billionaire 1% like you to care about that.

[high density]

28. Why waste time on this if the end desire to be "revenue neutral?"

I'm completely confused about why we would want to "reform" taxes and at the same time not bring in more revenue for our financially-pinched government. Anything that is "revenue neutral" at this point is simply continuing the redistribution of wealth upward.

[paulk]

30. it seems like politicking to me

I often feel that our political class gets too caught up in the beltway game and ignores the fact that things are really bad out here in the heartland. It's all about winning and not so much about actually solving anything.

[provis99]

29. here's the rationale: Goldman Sachs is a corporation.

[indepat]

31. Cutting corporate tax rates is the right thing to do: much too far to the

right to be of any societal good.

[gulliver]

32. Reich is just playing dumb to get some clicks.

Even though Reich knows exactly why Obama is proposing what he is proposing, Reich has to pander to people who don't get it. He now makes some of his living harmlessly validating less-than-deep thinking by pretending to giving it serious consideration. On the plus side, a thumbs down from Reich helps inoculate Obama's proposal against specious attacks from the right.

[paulk]

33. I don't find your "attack the messenger" argument at all compelling

perhaps you could explain why "Obama is proposing what he is proposing"?

[bluestate10]

41. I will be more direct.

Reich has his head up his ass and is being worshipped by people that likely have the same affliction. While lowering corporate tax rates, the Obama tax proposal closes loopholes that has the largest US corporations paying no tax. The proposal also removes Bush tax cuts for people making more than a million dollars. On balance, the budget is a sound document that moves the country toward tax fairness.

[paulk]

45. right

he never loved Obama, etc.

wash, rinse, repeat.

[sendero]

34. While I usually agree with Reich.

... he must not have listened to the whole package. Cuts in rates AND in loopholes/subsidies will raise overall corporate payments.

[paulk]

35. I think his main complaint is that Obama has once again

made a concession (cutting taxes) before the bargaining even starts.

Just close the loopholes - no reason to be revenue neutral.

[sendero]

36. I've been a consistent critic of Obama's...

.... but this is simply good politics IMHO. Who can argue, we are cutting the rates, and BTW, we are closing a few loopholes while we're at it.

Without the rate cuts, this is deal on arrival, period. With them, if it dies it makes the pukes look like, well, pukes.

[paulk]

37. I understand it's good politics,

but it is very likely dead on arrival either way.

It's the same pattern Obama has used before - make the concession before the bargaining starts and, at best, end up scoring some political points - in the long run it's all just theater - the only real result , imo - is a position taken of cutting taxes while the pukes refuse to close the loopholes because that's "raising taxes". It will be hard to backtrack from the "cutting taxes" bit once the loophole provisions get killed by the pukes (and a few Dems) with their army of corporate lobbyists.

I hope I'm wrong.

[bluestate10]

42. Realistic tax documents are not that simple.

Tax proposals come with gains and tradeoffs. President Obama crafted a sound document.

[bluestate10]

38. As usual.

Reich can't see the bigger picture, choosing instead to stare into his self defined myth. The very person that rails against out sourcing of US jobs fails to recognize that President Obama's tax proposal would substantially improve job prospects for increasing manufacturing jobs on USA shores.

[Autumn]

40. Very good question indeed. Why?

I'm sure the explanation is right in front of our eyes.

[Major Hogwash]

43. Closing all the loopholes in the federal tax code will more than make up for the tax cut.

I think that Reich is playing the devil's advocate here.

General Electric didn't pay one thin dime last year in income taxes because of all of the loopholes they have in the tax code for corporations to use to get out of paying income taxes.

So, closing those loopholes will cause GE, among other corporations, to pay some taxes.
It's simple math, really.
Forcing corporations to pay a 28% income tax rate, is 28% more in income taxes than what they are paying now.

Because of all of the loopholes in the tax code, the way it is written now, some corporations pay 0% tax rates.

The Republicans will never go for it, though.

[sad sally]

44. The last time there was major tax reform was in 1986. Remember box-wine drinking Senator

Bob Packwood having little slips of paper stuffed in his pocket that eventually became the major tax reform bill? Okay, maybe most of you are too young to remember the two-years of legislative wrangling and major lobbying to pass those little slips of paper that finally became law.

Having the expectation that because the President said he wants to lower corporations tax rates and get rid of loopholes will happen anytime soon or have any immediate influence on deficit reduction with raised revenues is like believing in the tooth fairy.

Tax reform won't create any jobs or boost the economy in the short run; it could take anywhere from two to five years to see any benefits, particularly in the way corporations operate. And if true tax reform is actually taken on by our do-nothing congress, you can bet individual tax payers "loopholes" will also be on the table - like mortgage interest, property taxes, health costs and state income tax deductions.

According to the IRS, only 34% of 2008 tax filers itemized their deductions. Those individuals who benefit from tax loopholes will hardly give up them up without a fight.

How can anyone honestly think that in an election year this anything but political campaign red-meat. Does anyone believe that congress - those folks who junked up the tax code for their contributors - would tackle this now? Washington players - the President and congress - go for the quick fixes - this ain't one.

[paulk]

46. I agree

this is little more than election year politicking

[Kablooie]

49. He wants Republican votes, that's why.

[HughBeaumont]

50. He's likely not going to get them with the whole "loophole closing" thing.

Repubs will never agree to do anything that inconveniences their handlers even one atom speck. The bosses love anything that gets them out of paying their fair share, and BOY do these loopholes work wonders in that area.