In my assessment of President Obama's corporate tax reform proposal yesterday, I aired my suspicions that the president had no real intention of aggressively pursuing his own policy:
There are major flaws with Obama's plan, the biggest of which is that it's a giant political head fake. President Obama has had more than three years to do offer leadership to rectify our uncompetitive and inefficient tax system. For two of those years, he had a fully compliant Congress at his disposal. Yet when his debt commission recommended significant tax reforms, he moved on none of them. Now, an election looms, and Republicans are poised to make tax reform and economic growth central issues in the campaign. By rolling out this tardy tax plan, Obama is inoculating himself against political charges of inaction. "See, I've proposed something that sounds reasonable to most people," he'll say, inevitably invoking one of this favored tropes by noting that a majority of economists from "across the political spectrum" endorse his ideas. But does he have any intention whatsoever on acting on this plan? I doubt it. Pardon my skepticism, but I tend to believe there's a reason the president couldn't be bothered to even show up for the announcement of his own plan, a task he pawned off onto Tim Geithner. Barack Obama is not a modest man. If his administration were releasing a major policy initiative to which he was deeply committed, I tend to think he would insist on being its public face and top salesman. Remember, he has a gift. By merely issuing a perfunctory written statement, Obama signaled his ambivalence to the rapacious tax-hike-and-spenders within his base.
Various mainstream media news accounts have confirmed my hypothesis:
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.
On Friday, Congress approved extending a payroll tax cut through the end of 2012. Its expiration will coincide with several other fiscal earthquakes: the expirations of individual tax cuts enacted under President George W. Bush, and $1.2 trillion in automatic budget cuts across all government programs imposed as part of last year's deal to raise the debt ceiling. After these events and others, analysts said, thorough tax reform may be a realistic prospect. For now, they said, tax proposals will largely amount to political messaging.
The White House provided few details on Wednesday, and most concerned the proposed reductions rather than the offsetting increases, thwarting detailed analysis. The administration introduced its overhauls ofand health care in the same way. But the high-concept approach also reflects that Wednesday’s announcement was a campaign event. There is little chance that a divided Congress, its attention focused on November, will overhaul the corporate tax code this year.
To summarize, (1) the White House offers scant details, rendering its plans unscorable by analysts, (2) it punts legislative specifics and uncomfortable decisions to Congress, and (3) Obama didn't even show up to preside over his own "campaign event" dog and pony show, betraying how little he cares about the fate of the program. We've witnessed this brand of leadership abdication over and over and over and over and over and over again from this president. Hey, but at least he's staked out a bold stance on gay marriage!
"He's said he's evolving on the issue." [Laughter].
The AP has also noticed an interesting element of Obama's hazy corporate tax "simplification" project:
To Close Tax Loopholes, Obama Would Open New Ones
Economists note that Obama's plan would upturn the very playing field the administration says it wants to level. It would give manufacturers preferential treatment: Tax breaks would effectively cap their rate at 25 percent. Other companies would pay up to 28 percent. The current top corporate tax rate is 35 percent. Some say such varying rates can distort the economy by diverting investment into some industries and away from others that might pack a bigger economic punch. "The administration is not making sense," says Martin Sullivan, contributing editor at publisher Tax Analysts. "The whole idea of corporate tax reform is to get rid of loopholes, and this plan is adding loopholes back in."
Conservative economist Josh Barro is pushing back against Jim Pethokoukis' rejection of Obama's plan, which we quoted extensively yesterday. Barro's point, which I touched on in my original post, is that some of the broad elements of the president's proposal are laudable and shouldn't be categorically dismissed:
It’s important to remember that this plan is an opening bid. The president has a good vision on corporate taxes with some bad details. So, we should try to make sure that Congress takes this proposal and improves it. Keep the rate reduction and good base broadening ideas, like limiting the deductibility of interest. Strip out bad proposals, like expanded preferences for domestic manufacturing and clean energy. Done right, these fixes could even create room to lower the corporate tax rate farther than 28 percent.
Instead, a lot of commentators on the right have basically responded by denouncing the plan. Jim Pethokoukis at AEI calls the plan “a total bust.” Why is it a bust? Jim shares some of my objections–to the manufacturing and worldwide tax provisions–but those strike me as reasons that the plan needs to be changed, not that it is a bust. Jim’s overarching, un-fixable objection seems to be that Obama should have proposed a large net reduction in corporate taxes.
Jim's response is here. The larger point is that this wonky debate is academic. The finer policy points don't really matter because Obama has telegraphed that the only reason he put this package forward (and did so in a written statement) is to check an electoral box. Why should an unserious proposal be taken seriously? I suppose the same question could be asked of Obama's latest budget disaster.
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