Republicans claim to support free market capitalism and the idea that any operation must bring in revenue over and above expenses to increase profit. However, when it comes to government their goal is reducing revenue at all costs, and if there is new revenue they demand it is transferred directly to corporations and the wealthy. The Republican’s primary purpose in governing, besides killing jobs, is increasing corporate profits at all costs by providing them with low tax rates and in many cases allows them to operate tax-free. America’s corporations enjoy some of the lowest tax rates in the world and it is primarily because the tax code provides write-offs, loopholes, credits, and tax breaks that allow many of the largest and most profitable corporations to pay nothing in taxes on perpetual record earnings.
Republicans, at the behest of their corporate masters, complain bitterly that corporations are burdened with crushing federal taxes and spent the past four years demanding that President Obama support corporate tax cuts and reforms to increase business’s bottom line as well as reduce government revenue. On Tuesday, President Obama proposed corporate tax reform to increase government revenue for job creation primarily aimed at the shrinking and economically suffering middle class. As is their wont, Republicans demand that tax reform is revenue neutral because they will not tolerate spending one penny to create jobs and boost economic growth. In fact, Americans should be well aware by now that every policy proposal, agenda, and piece of legislation Republicans support in Congress and the states is solely to increase corporate profits while killing Americans’ jobs.
The corporate tax rate is, on paper, 35% but the real rate is 12.6% as of 2010 due to tax code loopholes allowing corporations to pay a lower rate than middle-class Americans. The President’s proposal will eliminate some of those loopholes while reducing the tax rate to produce new revenue he intends to use to create jobs. Corporations and Republicans demand that tax reform reduces the corporate rate and remain revenue neutral to prevent the federal government from bringing in new revenue to fund $50 billion on infrastructure spending. Incidentally, a recent analysis shows that America desperately needs to invest $1 trillion in infrastructure to keep up with the rest of the civilized world, so $50 billion will hardly help the nation’s competitiveness, but it will create much-needed middle class jobs. Republicans claim reducing the corporate tax rate will lead to greater economic growth, but it is as false as their thirty year contention that giving the rich greater tax cuts is the key to job creation and a booming economy.
The President’s proposal includes raising revenue by taxing offshore profits that allow the largest corporations to enjoy obscene income tax free, but Republicans support big business’s proposal to bring their hoards of cash back to America only if they are given a “no-tax” holiday. In 2004, Republicans allowed corporations to bring untaxed earnings home and gave them a one-time-only tax rate of 5.25% if they repatriated the profits within a year, but the deal barely increased short-term revenue, and was a huge long-term revenue loss. Corporations that took advantage of the deal used 92% of $300 billion of repatriated profits for payouts to their wealthy shareholders while eliminating thousands of jobs to cover their “burdensome” one-time repatriation tax rate. While corporations profited from the “tax holiday” and killed thousands of jobs, the government lost billions in revenue over the long haul that contributed to the deficit Republicans are using as a reason to cut spending, kill jobs, and oppose new job creation measures. As is usually the case with any proposal Republicans support, the economy, the people, and government loses to increase profits for their precious corporate donors.
President Obama’s proposal is not giving corporations a tax holiday for bringing their profits back to America as some critics complain because his reform plan includes changes in the way that corporations pay tax on international income. The benefit to the nation is it raises more much-needed revenue immediately than in later years, and curtails corporate domestic tax expenditures according to director of the National Economic Council. He said, “This is not…a repatriation tax of any kind… In any corporate tax reform that’s been done in other countries or any proposal that you see currently, there is one-time revenue” and it is exactly what the President is demanding to help create jobs. The President even pre-empted Republican demands that corporate tax reform be revenue neutral by making it clear that any reform has to be judged on the revenue raised in the second ten years of enactment and not just initial increases.
The President is offering a fair deal to corporations that have not paid taxes on their profits for too long, and eliminating tax-free gimmicks in exchange for a lower corporate tax rate is more than a generous offer from the American people who are picking up the tab when corporations avoid taxes. Republicans complain that expecting corporations to pay their fair share on profits retards growth, but an Economic Policy Institute (EPI) economist debunked their claims as not holding up to scrutiny. He said “there is no apparent association between the statutory corporate tax rate and economic growth after examining every possible scenario including statutory tax rates, effective rates, effective rates on capital income rather than corporate income, as well as inserting a one-year lag in the data to see if the putative growth effects were being hidden.” However, the benefit to the nation’s economy is immeasurable in the jobs created if Republicans can concede spending a measly $50 billion on infrastructure improvement.
In Republican parlance, revenue neutral means giving corporations reduced rates, a tax-free holiday on repatriated profits, and an all-clear to kill more jobs by keeping their operations overseas to take advantage of unfair tax incentives. The President cannot change the tax code on his own, and his proposal is more generous than corporations deserve, but Republicans will oppose any offer that does not reduce government revenue. It is important to remember that Republicans have signed a solemn pledge to Grover Norquist to never increase taxes under any circumstances, and coupled with their blind obedience to the U.S. Chamber of Commerce, the Koch brothers, and Wall Street to oppose any reform that does not starve the government of revenue (their definition of revenue neutral), it is unlikely they will even consider the President’s proposal.
President Obama is putting Republicans in a no-win position with the public by proposing to cut the corporate tax rate in exchange for reforming the corporate tax code. Many of the largest corporations are hoarding hundreds of billions of dollars offshore on international profits, and besides the most profitable American corporations paying zero taxes, those that do pay enjoy a low 12.6% rate that is a lower than most Americans in the middle class. Americans in the middle class are quickly slipping into poverty, and even though $50 billion in infrastructure spending is twenty times less than what the country requires to remain competitive, it will assuage the devastating effects of the $85 billion sequester cuts and help offset the millions of jobs being eliminated indiscriminately.
Americans have experienced a thirty-year experiment in giving tax breaks to the wealthy and corporations that has decimated the middle class and created a nation of peasants barely able to survive. Although President Obama’s proposals will not completely solve the economic malaise or create full employment, it is a step in the right direction that leaves Republicans with little choice but admit their goal is killing growth, jobs, and transferring what is left of 98% of the population’s wealth directly to the uber-rich and their corporations, or pass the President’s tax reform and invest in infrastructure spending to create jobs. However, with their stated war on the people in full swing, their apparent joy at killing jobs, cutting domestic programs, and creating poverty, the chance they will break their no-tax pledge to Grover Norquist or disobey their corporate masters means they will block the President’s reform proposals. With the President’s recent propensity to speak to the people with brutal candor and take his case to the public, Republicans are going to face an angry middle class that, like the President, has had enough of the GOP.