As Republicans prepare to take control of Congress in a couple of weeks, after eliminating women’s reproductive rights, blocking the President’s executive action on immigration enforcement, and thwarting normalized relations with Cuba, they plan to revert back to Bush-era trickle down tax policy. In fact, very high atop the GOP’s agenda is reforming what they call “the highly unpopular federal tax code” to better serve the rich and corporations and express their thirty year love affair and devotion to “trickle-down” economics. However, some Republicans are beginning to express little hope that the President will go along with the scam and may eschew raising taxes on the poor, for now, and instead set their sights on slashing corporate taxes.
According to one of George W. Bush’s economic advisors and former head of the alleged non-partisan Congressional Budget Office, “I don’t think Republicans can get the individual side of the tax code done next year.” It is noteworthy that Paul Ryan intends on reinstituting an exclusively Republican CBO to approve the Republican trickle-down tax scheme as an economic boon to fool Americans into thinking that after thirty years, trickle down will work…this time. A Republican-friendly CBO will determine that the President’s objections to Republican plans to increase taxes on, and draw more revenue from middle and lower-class incomes to pay for tax cuts for the rich and corporations is errant and is a winning economic scheme for the storied “job creators.”
The Republican’s favored scheme is cutting taxes for the rich and simplifying the tax code for everyone else by expanding the tax base; translation – raise taxes on lower income Americans including those living in poverty and elderly Americans living off their meager Social Security retirement income. Republicans have also floated eliminating popular deductions for middle-class taxpayers thus raising their tax liability to fund corporate and rich Americans’ tax cuts. However, with the President’s intent on protecting the middle and lower class income earners, Republicans will likely put all their focus on corporate tax cuts.
Republicans complain that America has highest official corporate tax rate in the world at 35%, but U.S. corporations actually only pay an effective (real) federal tax rate of 12.6% as of 2010 according to Government Accountability Office. Even when foreign, state and local taxes were taken into account, the companies paid only 16.9% of their worldwide income in taxes in 2010. But that is too high for Republicans. Cutting the official corporate rate will bring the effective rate closer to 1-2 percent, but even that rate is far too high for Republicans and their corporate donors according to their stated intents.
Republicans want to cut corporate taxes drastically while still maintaining corporate tax credits, exemptions, and offshore tax havens to bring the effective corporate tax burden on American companies to zero or less. Already, 26 of the largest and most profitable U.S. corporations pay zero in corporate taxes and receive tax refunds due to less than zero tax liabilities borne of outlandish tax breaks, exemptions, and credits; including credits and incentives for moving jobs out of the country. However, some corporations still pay taxes on profits that Republicans cannot tolerate and they certainly will not be satisfied until all corporations’ effective tax rate is zero and they receive refunds from taxes collected from the middle class.
President Obama is not averse to reducing the corporate tax rate, and he has proposed reducing the rate to 28 percent. But unlike Bush-Republicans, President Obama intends on paying for the rate reduction by eliminating unfair exemptions, loopholes, and adding some new taxes. The President’s proposal enraged Republicans for eliminating exemptions and loopholes, but were particularly incensed that Obama pushed to use any new revenue from closing loopholes to repair the nation’s crumbling infrastructure. Republicans plan to use any new revenue to fund more tax breaks and loopholes for corporations and the wealthy. According to one Republican aide, Republicans are not about to go along with using any revenue for infrastructure repair when they can further cut taxes for the rich and said, “That’s just a big, big difference” in ideology founded on where Republicans believe all the nation’s wealth belongs.
Senate Democrats have their own ideas for tax reform including Ron Wyden (D-OR) who proposed lowering the corporate tax rate to 24% and paying for it by raising taxes on capital gains and dividends as well as multinational corporations. Cutting corporate taxes by 11% is not enough for Republicans and the idea of raising taxes on anyone except the poor and middle class is a non-starter. Some Republicans openly proposed eliminating taxes on some corporations altogether.
Trickle down devotees Paul Ryan and Orin Hatch want to put an end to taxation on foreign corporate earnings in conjunction with cutting domestic corporate taxes to a rate close to zero. They claim that cutting taxes for corporations with their headquarters in America in conjunction with eliminating taxes on foreign corporate earnings will encourage American corporations to relocate their headquarters back to America where, in either scenario, they can enjoy little or no taxation. It is noteworthy that Republicans have no provision to encourage corporations to move manufacturing jobs back to America, just their corporate headquarters and only if they are given tax-free status.
Republicans are eager to make the corporate tax code more attractive to businesses to, as Senator Orin Hatch says, “assist more worldwide American companies establish or retain their corporate headquarters in the United States, increase tax-free exports to global markets, and retain tax-free profits in the United States.” The benefit to Americans in jobs, income equality, and increased revenue to repair, rebuild, and sustain America is zero. But by now many Americans comprehend that doing anything for the majority of Americans or the nation was never part of the Republicans’ tax reform scheme.
Apparently Republicans did not learn their lesson in December when the President threatened to veto an over $440 billion “bipartisan” giveaway to corporations. Treasury Secretary Jack Lew echoed President Obama’s sentiments in calling the tax deal “the wrong approach.” Lew said, “An extender package that makes permanent expiring business provisions without addressing tax credits for working families is the wrong approach, at the expense of middle class families,” and joined the President in calling for a deal with “broadly shared” benefits. Still, Republicans have deluded themselves that with a Republican-controlled Congress, the President will embrace trickle-down economics and increase the already monumental income disparity hurting the economy and the majority of Americans.
Whatever Americans think of Barack Obama, he is not George W. Bush or Ronald Reagan if for no other reason than he understands that after a failed thirty year trickle down experiment; it does not work for anyone but the extremely wealthy. One would think that by now Republicans would get a clue that this President’s tendency is to support any agenda that works for all Americans; not just the rich and corporations.