We knew this was coming. In fact, in the first year of the Obama administration, I focused on this very issue. Now it has risen to the level of potential reality. The Obama administration is ready to launch its assault on corporate America in a manner that will extend its current attack on individuals and small businesses to the entire economy.
To read most press reports, the new proposal by President Obama to "lower" the top corporate tax rate to 28 percent from the current 35 percent appears a move toward helping U.S. corporations and their many employees and investors. It is anything but that. Indeed, the Obama proposal would actually place a higher tax burden on many companies and leave multinational corporations based in the United States at a competitive disadvantage in the world economy, and could result in our soaring gasoline prices becoming a permanent fixture in America.
The "details" of Obama's proposal come from Treasury Secretary Timothy Geithner, whose handiwork has contributed mightily to a whole host of boondoggles that have run up our deficit and produced little in measurable results. Geithner, who always has his silk tie slightly askew as to portray the casual but elegant style of the Kennedys in the 1960s, belongs in that decade. His philosophy reflects that of the president he serves, which is, simply put, to make "everyone pay their fair share." Of course, once again the true policy is not fair, as it punishes those who produce jobs, provide value to 401Ks and retirement plans, and employ hardworking Americans.
One example of how this "tax break" for corporations could be a cost of living increase for all Americans can be found in Geithner's proposal that tax breaks currently used to allow energy companies to write off the costs related to drilling and the use of wells be eliminated. Instead, those credits would go to efforts to create "alternative energy." Perhaps we could see many more Solyndras pop up and provide the same stunningly disastrous results.
This one part of a massive and yet truly to be fully described proposal could permanently make the nation dependent on foreign sources for oil and drive the cost of gasoline up to what appears to be "the gold standard" for this administration, that being Europe. Instead of expanding our ability to drill and produce natural gas in America, or have a stable partnership with Canada through the Keystone proposal, President Obama would prefer to destroy the incentive that now exists for our current level of domestic production.
Then there is the proposal of forcing U.S. corporations doing business outside of the country to pay a minimum tax on their overseas profits each year. Currently if they keep such profits overseas, they are not subject to taxation. That sounds very reasonable -- but it could, once again, have a devastating impact on our economic future. We have been forced, by Republicans and Democrats alike, to operate in a global market. That means that corporations must compete with the Chinas of the world in an uncertain and fragile world economy. The "profits" kept abroad are not only reserves necessary should the international scene slide, but they are sources for reinvestment into research and market expansion in every corner of the world.
Tax these international "profits," and many companies, who often are held hostage to the value of the dollar, will have no profits, will lose their competitive edge and will have to cut back the employment of U.S. workers. This, like bailouts and "shovel ready" stimulus plans, is another untested theoretical policy that could easily backfire.
The list goes on and on. There are some good points to the proposal, but most appear like a shiny red apple that, when opened, is rotten to the core. Yes, taxes will be lowered a bit, but commonly used expensing of costs will disappear. That's why in the end Geithner says the plan will increase revenues.
None of these issues seemed to make the wire stories describing the Obama corporate "tax cut" ... what a shock.
(Note: And in the same spirit of getting the full story, last week in an article about Newt Gingrich I referenced pollster Kellyanne Conway in a manner that was unfair to her. My intention was to illustrate my independence from Gingrich, and through glib wording I insulted her talents, which are considerable, and for that I owe her an apology).