Here is Obama\’s plan: he wants to lower the corporate tax rate to 28%, and for some industries, it would be even lower; the manufacturing sector, a particular pet of Obama\’s, would get a 25% top tax rate. That part of the plan is not particularly revolutionary; Obama proposed it last year, when it briefly excited the corporate community and then fell with a thud. Republicans made tax cuts a life-or-death issue last year, and they should welcome the idea.
The idea of corporate tax cuts, taken alone, is sadly not particularly useful; most big companies don\’t pay the full tax rate because they\’ve long ago figured out how to avoid it, so lowering the imaginary dollar value of what they owe is not going to make a huge impact.
The second part of Obama\’s plan – to increase infrastructure spending – is productive and long overdue. Obama wants to use the money raised from corporate taxes to do this. If that works, great.
There\’s a glorious joy to this.
So, cut corporate taxes, Republicans should like this. Spend the extra money on infrastructure, everyone should like this.
Hunh? A tax cut is going to bring in extra revenue? Umm, so it\’s not a tax cut, is it?
And our Heidi simply gaily sails over this contradiction.
The actual proposal is that the rate should be cut, certain allowances should be cut at the same time (depreciation for example) and overseas profits should be taxed as they currently are not. What is being proposed is a rise in corporate taxation, not a cut. That\’s why there\’s extra revenue raised to be spent on infrastructure.
And no, just for the avoidance of doubt, no one at all is invoking the Laffer Curve to explain this rise in revenue.