That’s right. Yesterday we learned about this from slinkerwink’s great diary that explained the sad details of Obama’s Jobs Council headed by General Electric Executive Jeffrey Immelt and its recommendations. There are a lot of misconceptions about how this one supposedly “isn’t as bad as we think." WRONG.
On Corporate Tax Reform
The panel calls for lowering corporate tax rates to "internationally competitive levels" while broadening the corporate tax base by eliminating deductions and loopholes.
But the report notes disagreement among council members over whether to shift to a "territorial" system that exempts most or all foreign income from corporate taxes when it is repatriated.
There was of course the response to slinkerwink’s diary from the “it’s not so bad” camp downplaying all of this. They used theoretical examples of how closing some of these loopholes (which in effect taxes corporate income with the effective corporate tax rates that in turn do indeed make rates quite low in comparison to other countries) in the tax code will theoretically raise taxes on corporations instead of cutting them even if you cut their nominal rate. I admit it wasn’t a bad intellectual exercise, in theory.
Here’s the problem, it has nothing to do with reality. Reality is important and involves real peoples' lives and well being. These RW "job creator" fallacies have nothing to do with real data and it wastes valuable time excusing failed policies.
We know it’s a failed policy, because this has already been studied in the real world by the Joint Committee on Taxation who deals with these issues all day every day. Here’s a helpful synopsis of precisely why it’s a failure from the Tax Policy Center referencing this report.
It has been an article of faith among most congressional Republicans and many Democrats that the corporate tax rate should be cut from today’s top level of 35 percent to 25 percent—or even less. And backers of the idea breezily suggest this could be paid for by scaling back some corporate tax breaks. But a new report released today by the congressional Joint Committee on Taxation concludes it can’t be done.
The non-partisan JCT found that even if Congress scrubbed every single corporate preference from the code (a political fantasy if ever there was one) it could not get the corporate rate below 28 percent without adding to the budget deficit, raising taxes on individuals, or cutting spending.
The JCT study, which was requested and released by House Ways & Means Committee Democrats, comes just days after the panel’s chairman, Rep. Dave Camp (R-MI), proposed a 25 percent rate as part of a major corporate reform. Camp did not say how he’d pay for his proposed changes.
So no, this is bad policy and closing those loopholes will not really mean anything if you lower the rate except higher taxes on individuals and more austerity. Of course it doesn’t have to be that way, but our president and most Democrats are stuck believing in the fallacy of dangerous deficits so the political pressure created by this national accounting fiction religion will make this a reality.
This whole debate is based on the fantasy that cutting corporate taxes will create jobs instead of demand. The president’s support for these fantasies just keep coming up to the forefront because he hires people like Jeffrey Immelt with even more dangerous fantasies on this front. Here’s former Labor Secretary, SS/Medicare trustee, and now Professor at Berkley Robert Reich explaining why this debate is totally off base and delusional when it came up in 2010 regarding corporate tax write offs with the same incentives.
The reason businesses aren't investing in new plant and equipment has nothing to do with the cost of capital. It's because they don't need the additional capacity. There isn't enough demand for their goods and services to justify it. Consumers aren't buying because they're trying to come out from under a huge debt load, including mortgage debt; they have to start saving because their nest eggs are worth substantially less; and they've lost or are worried about losing jobs and pay.
In any event, small businesses don't have enough profits against which to use these tax credits and deductions, and large corporations are sitting on over a trillion dollars of profits and don't need them.
Republicans and corporate lobbyists have been demanding tax cuts on corporate investments for one reason: Big corporations are investing in automated equipment, robotics, numerically-controlled machine tools, and software. These investments are designed to boost profits by permanently replacing workers and cutting payrolls. The tax breaks Obama is proposing would make such investments all the more profitable.
In sum, Obama's proposed corporate tax cuts (1) won't generate more jobs because they don't put any cash in worker's pockets (as would, for example, exempting the first $20,000 of income from the payroll tax and making up the difference by applying the payroll tax to incomes over $250,000); (2) will subsidize companies to cut even more jobs; and (3) will cost $130 billion -- money that could better be spent helping states and locales avoid laying off thousands of teachers, fire fighters, and police.
Though these are technically specific tax write offs instead of lowering the nominal rate while ridding loopholes for corporations(which won't be beneficial as I have shown), the overall tax incentive is the same as lowering the nominal rate. Robert Reich explains rather well why all of these tax rate incentives towards corporations are off base. As Robert Reich says we need demand instead.
Corporations are sitting on trillions of dollars and you don’t see them hiring a lot of new people do you? That’s the reality. It’s very telling that Robert Reich doesn’t work for Obama and Jeffrey Immelt does even though Robert Reich was on the transition list. It’s past time this administration invested in acknowledging reality for once.
In addition, the report called for a series of reforms to further streamline government rules and reduce the regulatory burden on businesses, which it said would enhance U.S. competitiveness.
Don't get me started on burdensome regulations nonsense. If there ever was a RW frame about why there is a lack of jobs, it's that. In order to enhance U.S competitiveness you would have to have an overhaul of the legal framework of trade law involving chapter 11 provisions in NAFTA, corporate patents, and the WTO for starters.
It has nothing to do with competition or over-regulation that is burdensome. That is RW nonsense spouted by a Democratic administration which we hear way too much on way too many issues whether it's on voucher education or the importance of Chicago School economics.
We have some of the most productive workers in the world. We just don't write laws or regulations that protect them or the industries they helped create for the entire globalized world anymore. Why some kossacks are defending that I'll never know. And yes, you could point out some regulations are redundant, but so are the savings when it comes to the big picture of regulation versus deregulation.
And if you want to defend domestic drilling, take it to the Gulf and see how enthusiastic that idea is. It turns out its not very safe after all, unlike what the president said right before the BP disaster. That was a painful to listen to because he sounded just like John McCain and Sarah Palin and yet we have to hear this again? Who did we vote for in 2008?
Sadly what we seem to have in common with the Eurozone is that we are both politically destroying ourselves. We have way more options than any country in the Eurozone too, because we have control of our own currency yet we still choose to stay in an economic coma. An economic coma we won’t wake up from unless this administration gets serious and stops reading us discredited neoliberal bedtime stories by our bedside. It’s time for this administration and this Congress as well as everyone who supports them to wake up and demand they wake the job market up.
Demand more stimulus. Demand more spending and to get away from this flawed Republican framed tax cut debate. Demand real solutions. Defend real solutions. Demand spending. Defend deficit spending towards full employment. Demand real knowledge of our federal budget and our monetary system. That’s worth defending. Not this.