Tardy On Tax Reform

Obama Makes A Late Entry Into The Corporate Tax Debate With A Proposal That Is Short On Details

_____________________________________________________________________

“‘Secretary [Timothy] Geithner Will Conduct A Pen And Pad Briefing To Discuss The Release Of The President’s Framework For Business Tax Reform …'” (Neil Munro, “White House To Pitch Business Tax ‘Framework’ To Compete With Romeny’s Reform Announcement,” The Daily Caller , 2/22/12)

DESPITE YEARS OF TALKING ABOUT IT, OBAMA WILL ROLL-OUT CORPORATE TAX REFORM IN A CABINET LEVEL, OFF-CAMERA BRIEFING

Obama’s Corporate Tax Reform Plan “Has Been In The Works At Treasury For Two Years.” “The administration plan to revamp a corporate code that is widely derided as inefficient and anticompetitive has been in the works at Treasury for two years, and is a priority of Mr. Geithner. Yet he has been preoccupied with crisis management, and is unlikely to see the project through since he plans to leave office after this year.” (Jackie Calmes, “Obama Offers To Cut Corporate Tax Rate To 28%,” The New York Times, 2/22/12)

• Obama Attacked The Corporate Tax Code In His State Of The Union Address Last Year. “The administration has been working on a corporate tax overhaul for more than a year. In his 2011 State of the Union address, President Barack Obama blamed ‘a parade of lobbyists’ for the complex tax code that leaves companies with disparate tax rates.” (Richard Rubin and Julianna Goldman, “Obama Administration Said Set To Release Corporate Tax-Rate Plan Tomorrow,” Bloomberg , 2/21/12)

By Leaving Corporate Tax Reform To Treasury, Obama Is Signaling That It’s A “Lower Priority.” “While Obama has been promoting various aspects of his economic agenda in personal appearances and speeches, the decision to leave the corporate tax plan to the Treasury Department to unveil signaled its lower priority. What’s more, the administration’s framework leaves much for Congress to decide – a deliberate move by the administration to encourage negotiations but which also doesn’t subject the plan to detailed scrutiny.” (Jim Kuhnehenn, “AP Source: Obama Seeks 28 Percent Corp. Tax Rate,” The Associated Press, 2/22/12)

• Obama Will Not Even Talk About Corporate Taxes Today. “Obama, however, is not scheduled to discuss his tax framework on Wednesday. Instead, just prior to the no-cameras-allowed Geithner event, the president will give a short televised speech at the construction site of the Smithsonian National Museum of African American History and Culture.” (Neil Munro, “White House To Pitch Business Tax ‘Framework’ To Compete With Romeny’s Reform Announcement,” The Daily Caller , 2/22/12)

OBAMA’S PLAN WILL BE SHORT ON DETAILS BUT HEAVY ON ELECTION YEAR RHETORIC

Obama’s Corporate Tax Framework Has Little Chance Of Passing But It “Is Central To His Re-Election Strategy.” “Chances of accomplishing such change in the tax system are slim in a year dominated mostly with presidential and congressional elections. But for Obama, the proposal is part of a larger tax plan that is central to his re-election strategy.” (Jim Kuhnehenn, “AP Source: Obama Seeks 28 Percent Corp. Tax Rate,” The Associated Press, 2/22/12)

Obama Will Propose Lowering The Corporate Tax Rate But “Won’t Say Exactly How To Do All That.” “Later today, the White House will unveil its framework for overhauling the corporate tax code. They will propose bringing the corporate rate down to 28 percent, establishing a global minimum tax, and expanding the credits for R&D and manufacturing. But they won’t say exactly how to do all that.” (Ezra Klein, “Wonkbook: Tax Reform Is Really, Really Hard,” The Washington Post , 2/22/12)

• “Their Main Point, In A Sense, Is That It’s Not All About Breaks For Jets And Oil Companies, No Matter How Often Those Feature In The President’s Speeches.” “Put differently, getting the rate down to 28 percent requires making hard decisions about legitimate, fundamental features of the corporate tax code — decisions that the White House will clarify, but not specifically make. Their main point, in a sense, is that it’s not all about breaks for jets and oil companies, no matter how often those feature in the president’s speeches.” (Ezra Klein, “Wonkbook: Tax Reform Is Really, Really Hard,” The Washington Post , 2/22/12)

The White House “Is Making Two, Somewhat Contradictory Points,” That We Should Lower The Corporate Tax Rate But Are Not Sure How To Do It. “In a sense, this document is making two, somewhat contradictory, points simultaneously: Yes, we should reform the corporate tax code. That piece of conventional wisdom is true. But no, it’s not obvious how we should to do it, and it won’t be easy.” (Ezra Klein, “Wonkbook: Tax Reform Is Really, Really Hard,” The Washington Post , 2/22/12)

THE GLOBAL MINIMUM TAX WOULD PUT THE U.S. AT A GLOBAL DISADVANTAGE, WHICH BOTH OBAMA’S JOBS COUNCIL AND FISCAL COMMISSION RECOGNIZED

The Obama Administration Will Propose A Global Minimum Tax But They Won’t Say How High It Will Be. “But then, in the third section, the White House will follow up on an innovative idea they included in the State of the Union and propose a global minimum tax. They’ll say more about how such a tax will work, but they won’t say how high such a tax should be. That’s left up to Congress.” (Ezra Klein, “Wonkbook: Tax Reform Is Really, Really Hard,”The Washington Post , 2/22/12)

• The Global Minimum Tax Means That “Instead Of A Carrot, Corporate America Gets The Stick.” “So instead of a carrot, Corporate America gets the stick. Instead of lowering the U.S. rate to a competitive level, Obama would raise the penalty on keeping profits overseas. Indeed, the United States is a huge outlier in that it taxes the foreign profits of multinational companies.” (Jim Pethokoukis, “Why Obama’s Corporate Tax Plan Is A Total Bust,” The American, 2/22/12)

Obama’s Own Jobs Council Proposed Moving To A Territorial Tax System “In Order To Make America More Competitive In Global Markets” Rather Than Taxing Foreign Profits. “Many Council members agree that the U.S. should shift to a territorial system of taxation in order to make America more competitive in global markets. While most other developed nations have adopted territorial systems that exempt most or all foreign income from taxes when they are repatriated, the U.S. subjects all worldwide earnings to the corporate income tax when they are brought home to the U.S. This approach actually encourages U.S. companies to keep their earnings abroad rather than investing them here at home. Adopting a territorial tax system would bring us in line with our trading partners and would eliminate the so-called ‘lock-out’ effect in the current worldwide system of taxation that discourages repatriation and investment of the foreign earnings of American companies in the U.S.” (“Reform The Outdated Tax System To Enhance American Competitiveness,” The Jobs Council, Accessed 2/22/12)

Obama’s Fiscal Commission Recommended A Territorial Corporate Tax System Where Most Or All Foreign Profits Are Not Taxed. “Move to a competitive territorial tax system. To bring the U.S. system more in line with our international trading partners’, we recommend changing the way we tax foreign-source income by moving to a territorial system. Under such a system, income earned by foreign subsidiaries and branch operations (e.g., a foreign-owned company with a subsidiary operating in the United States) is exempt from their country’s domestic corporate income tax. Therefore, under a territorial system, most or all of the foreign profits are not subject to domestic tax. The taxation of passive foreign-source income would not change.” (“Moment Of Truth: The Report Of The National Commission On Fiscal Responsibility And Reform,” The National Commission On Fiscal Responsibility And Reform , 12/1/10)

• Rather Than Punishing Multinationals, Obama’s Fiscal Commission Said That Corporate Tax Reform Should “Help U.S.-Based Multinationals Compete Abroad In Active Foreign Operations.” “Make America the best place to start a business and create jobs. The current tax code saps the competitiveness of U.S. companies. Tax reform should make the United States the best place for starting and building businesses. Additionally, the tax code should help U.S.-based multinationals compete abroad in active foreign operations and in acquiring foreign businesses.” (“Moment Of Truth: The Report Of The National Commission On Fiscal Responsibility And Reform,” The National Commission On Fiscal Responsibility And Reform , 12/1/10)