The White House’s trial-and-error methodology was on full display today, as president Barack Obama offered the Republican opposition a new combination of old tax and investment policies, searching for the ever elusive “grand bargain.”
The deal is simple: a corporate tax reform that would lower America’s high statutory corporate tax rate from 35% to at least 28%. The lost revenue would be made up by closing loopholes that companies use to pay an average effective tax rate of 12.6%, often, in the case of multinationals, by keeping earnings overseas. In the long run these two effects will balance out, but at the beginning there will be some extra revenue—possibly generated by a one-time fee on all that offshore cash—that will go into paying for infrastructure, new manufacturing centers and training programs for workers.
It’s not a bad idea! A simpler tax code with lower rates would be better for business, and some long-term investment could improve growth.
It will never become a reality.
Now, that sounds like a harsh assessment, but Republicans who are the target of these overtures panned the idea before the speech. And then there’s…
Now, in Obama’s defense, the deal does set aside one of the big obstacles for an overhaul of the entire tax code: His desire to reduce the deficit by increasing the total amount of taxes collected, a method Republicans heartily oppose. By focusing on tax reform that is ultimately deficit-neutral—though it collects some new revenue to fund the jobs program as it gradually goes into effect—the administration is hoping to find a policy both sides can agree to. With Republicans too focused on an upcoming showdown over government spending and debt to bother articulating a jobs strategy, and immigration reform the only legislation with any real momentum among both parties, it’s hard to expect much more.