Obama to pitch lower corporate tax rate

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#1
Obama to pitch lower corporate tax

By Kim Dixon
WASHINGTON | Fri Feb 10, 2012 6:47pm EST

WASHINGTON (Reuters) President Barack Obama will call for cutting the top 35 percent corporate tax rate as early as this month, according to two sources close to the administration.

The president is likely to propose a rate closer to an average of that seen in peer nations, the sources said.

This would jibe with remarks made last year by Treasury Secretary Timothy Geithner, who suggested the United States should be moving to a rate more in line with its major trading partners in the high 20-percent range.

Obama outlined tax measures - including closing tax loopholes for companies that move facilities and jobs overseas - in his State of the Union speech in January, and will lay out principles for revamping corporate taxes by the end of February, a senior administration official said.

"We will talk more before the end of the month on what corporate tax reform would look like," the official said on Friday, confirming that it would include a call for "lower rates."

Facing a potentially tough presidential re-election challenge this November, Obama will propose cutting the rate following the release of his 2013 budget plan on Monday, February 13, according to the sources, who were not authorized to speak on the record.

While he spent a big part of his January speech to Congress criticizing businesses for moving jobs overseas, Obama said that "companies that choose to stay in America get hit with one of the highest tax rates in the world."

Only Japan has a steeper corporate tax rate than the United States among industrialized countries, though other countries make up the revenue with a value-added tax, he said. The United States does not have a VAT.

An overhaul of the corporate tax system is extremely unlikely in an election year, but the president's proposal could be an olive branch to the business community to show that he agrees with them on one key aspect of tax reform.

"I think what he will end up doing is saying, 'For years folks have been asking for a lower corporate rate, and here it is - what do you think?,'" said Jared Bernstein, a former economic advisor to Vice President Joe Biden.

Obama's Treasury Department was close to releasing a revamp of corporate taxes last year, but pulled back after business opposition, according to a former official.

Republican Rep. Dave Camp, the chairman of the U.S. House of Representatives' tax-law writing Ways and Means committee, has set a goal of trimming the top 35 percent corporate rate to 25 percent.

Gene Sperling, director of Obama's National Economic Council, has told reporters that the president will be laying out "principles" for corporate tax reform close to the budget release.

Obama's corporate plan will also include a new minimum tax on foreign profits earned in low tax countries - an unpopular idea in the corporate community.
http://www.reuters.com/article/2012/02/10/us-usa-taxes-obama-corporate-idUSTRE8191YM20120210
 
#2
Let me guess, the catch is that the personal rates go up. He won't let the "millionaire tax" go.
 

Josh_R

Registered User
#3
Isn't this the guy that insists that the rich pay their fair share?
Does not approve

 
#4
"Taxing the rich" means taxing small businesses that don't donate to the DNC. General Electric and Google will be fine.
 

CousinDave

Registered User
#5
"Taxing the rich" means taxing small businesses that don't donate to the DNC. General Electric and Google will be fine.

It also makes it easier for the gov't to raise everyone else's tax rates, well everyone else that actually pays labor taxes
 

Norm Stansfield

私は亀が好きだ。
#6
"Taxing the rich" means taxing small businesses that don't donate to the DNC. General Electric and Google will be fine.
Google and GE are multinational corporations. That is why they don't pay as much into the US government as an American business. Not because they get special treatment. If you worked 3 months in the US, and another 9 in Hong Kong, you would pay fewer taxes too.

And the reason why multinational corporations only keep the minimum necessary portion of their operations in the US (necessary to have full access to American consumers, without having to produce anything in the US), is the 39% total corporate tax rate the US has (I think 35% of that is just the federal tax rate). And after the corporation is taxed that, the same exact profits are taxed again, another 15%, once they reach the shareholders who funded the corporation in the first place.

If Google did what you do (produce full time in the US), the US government would take over half of the profits its shareholders earn by investing in the company. They wouldn't be fine. They would be much worse than you are for instance. The only reason why they are fine is because they are out of the reach of the American government. And they do pay taxes to the full, they aren't tax evaders, btw. They just don't pay them here.
 

Norm Stansfield

私は亀が好きだ。
#7
If you want to tax multinational corporations more, there are two options:
1. Lower corporate and payroll tax rates, and get rid of regulations and the burden of an overly litigious legal system, enough to cause them to want to be here.

2. Forget about corporate and payroll taxes altogether (because let's face it, the US is incapable of doing the things I described in point 1, while it stays a democratic republic, because it's filled with greedy, irrational fucks), and instead reform the tax system completely and impose an across the board uniform VAT and income tax.

That way, you wouldn't tax the portion of the corporation which is not in the US (the production part), you would tax their sales and their investors. Both of which they can't and wouldn't want to move out of the US.

Corporate and payroll taxes (which are both ridiculously high, even compared to socialist nations) are the biggest penalty on production a government could create. It is destroying production in this country at an alarming rate.
 

Norm Stansfield

私は亀が好きだ。
#8
It also makes it easier for the gov't to raise everyone else's tax rates, well everyone else that actually pays labor taxes
You mean payroll taxes? What do payroll taxes (which go towards keeping various social security programs afloat) have to do with corporate taxes (which go towards the general budget)?
 

f kane

Known Traffic Menace
#10
An obvious dance to the center, right on the election year schedule.

"Obama's corporate plan will also include a new minimum tax on foreign profits earned in low tax countries - an unpopular idea in the corporate community."

Whenever a Democrat says they are cutting taxes, they want to raise them in a different way. Give with the right hand and and take away with the left.

What would really help is if small business could get some real relief from their state and federal tax burden.
 

CousinDave

Registered User
#11
You mean payroll taxes? What do payroll taxes (which go towards keeping various social security programs afloat) have to do with corporate taxes (which go towards the general budget)?

No I mean any taxes, if you let them raise any form of taxes because you think it won't affect you, because you're not "rich" the next year they'll raise your taxes and there will be less opposition because the "rich" already had a tax increase so they won't care and the poor don't pay taxes anyway so they won't care.

Never agree to a tax increase for any reason
 

Begbie

Wackbag Generalissimo
#12
I don't know guys, Obama has followed through on the majority of his campaign promises from 2008...I'm sure he's really serious about this. Heh. Heh. :icon_cool
 
#14
Let me guess, the catch is that the personal rates go up. He won't let the "millionaire tax" go.
The corporate tax affects how a company can hire and pay people.

The income tax affects whether CEOs can buy this year's Lamborghini or last year's model.
 

Josh_R

Registered User
#15
Hey I didn't say lowering corporate taxes was a bad thing, it's just bullshit that it took him 3 years to come to that realization. Maybe someone should keep screwing with his calendar and tell him it's October. Next thing you know he'll be auditing the Fed and dropping the DOE.
 

Norm Stansfield

私は亀が好きだ。
#16
The corporate tax affects how a company can hire and pay people.

The income tax affects whether CEOs can buy this year's Lamborghini or last year's model.
Your envy of his Lamborghini doesn't give you the right to steal from him.

Besides, your attempt at stealing his Lamborghini won't work. You are just screwing yourself over. A rich CEO can at any time just move to a country that doesn't rob him blind. And the politicians in your country can't follow him. What they can do is use the power you handed them, to rob this CEO you were envious of, to rob you instead.

And, in a twist of sweet irony, your money is most likely going to fund some green project, who's CEO drives this year's Lamborghini. Except that unlike the other CEO (the one who was running a productive business, and was chased out of the country by your envy), this CEO hasn't earned his Lambo. He stole it from you, the guy who started the whole thing.
 

Sunsetspawn

Registered User
#17
"Obama's corporate plan will also include a new minimum tax on foreign profits earned in low tax countries - an unpopular idea in the corporate community."
Isn't this like Ron Paul's idea of fat tariffs for outsourced labor on American goods and services?

Move production to China?
Fuck you, pay me

Move call centers to India?
Fuck you, pay me

Remove jobs from the American economy?
Fuck you, pay me

I like the idea of seriously punishing outsourcing. There really is no other way to compete with Wing Wang's 50 cent an hour engineering job. At least then some of this trade deficit money comes back into the states, and the multinationals could always avoid these tariffs by moving production back here.
 

Josh_R

Registered User
#18
Isn't this like Ron Paul's idea of fat tariffs for outsourced labor on American goods and services?

Move production to China?
Fuck you, pay me

Move call centers to India?
Fuck you, pay me

Remove jobs from the American economy?
Fuck you, pay me

I like the idea of seriously punishing outsourcing. There really is no other way to compete with Wing Wang's 50 cent an hour engineering job. At least then some of this trade deficit money comes back into the states, and the multinationals could always avoid these tariffs by moving production back here.
Great idea! We'll punish outsourcing so that everyone here gets paid $40/hour and every product will be 10x more expensive! Yay protectionism!!!

Protectionism is frequently criticized by mainstream economists as harming the people it is meant to help. Most mainstream economists instead support free trade.[1][4] Economic theory, under the principle of comparative advantage, shows that the gains from free trade outweigh any losses as free trade creates more jobs than it destroys because it allows countries to specialize in the production of goods and services in which they have a comparative advantage.[15] Protectionism results in deadweight loss; this loss to overall welfare gives no-one any benefit, unlike in a free market, where there is no such total loss. According to economist Stephen P. Magee, the benefits of free trade outweigh the losses by as much as 100 to 1.

Most economists, including Nobel prize winners Milton Friedman and Paul Krugman, believe that free trade helps workers in developing countries, even though they are not subject to the stringent health and labour standards of developed countries. This is because "the growth of manufacturing — and of the myriad other jobs that the new export sector creates — has a ripple effect throughout the economy" that creates competition among producers, lifting wages and living conditions.[17] Economists have suggested that those who support protectionism ostensibly to further the interests of workers in least developed countries are in fact being disingenuous, seeking only to protect jobs in developed countries.[18] Additionally, workers in the least developed countries only accept jobs if they are the best on offer, as all mutually consensual exchanges must be of benefit to both sides, else they wouldn't be entered into freely. That they accept low-paying jobs from companies in developed countries shows that their other employment prospects are worse. A letter reprinted in the May 2010 edition of Econ Journal Watch identifies a similar sentiment against protectionism from sixteen British economists at the beginning of the 20th century.[19]

Alan Greenspan, former chair of the American Federal Reserve, has criticized protectionist proposals as leading "to an atrophy of our competitive ability. ... If the protectionist route is followed, newer, more efficient industries will have less scope to expand, and overall output and economic welfare will suffer."[20]
Protectionism has also been accused of being one of the major causes of war. Proponents of this theory point to the constant warfare in the 17th and 18th centuries among European countries whose governments were predominantly mercantilist and protectionist, the American Revolution, which came about ostensibly due to British tariffs and taxes, as well as the protective policies preceding both World War I and World War II. According to Frederic Bastiat, "When goods cannot cross borders, armies will."
Free trade promotes equal access to domestic resources (human, natural, capital, etc.) for domestic participants and foreign participants alike. Some thinkers extend that under free trade, citizens of participating countries deserve equal access to resources and social welfare (labor laws, education, etc.). Visa entrance policies tend to discourage free reallocation between many countries, and encourage it with others. High freedom and mobility has been shown to lead to far greater development than aid programs in many cases, for example eastern European countries in the European Union. In other words visa entrance requirements are a form of local protectionism.
 

Sunsetspawn

Registered User
#19
Great idea! We'll punish outsourcing so that everyone here gets paid $40/hour and every product will be 10x more expensive! Yay protectionism!!!
Offer a real counterargument and not a talking point. China has its currency artificially devalued; it is out main economic problem and nobody will touch it (aside from education quality and costs). We cannot compete with that, period. On our current path the government will be supplying all of the jobs and just keep printing money and borrowing until the dollar is worthless. Please tell me how our current free-trade magic will prevent that?

Rising costs will be an acceptable side effect.
 

Norm Stansfield

私は亀が好きだ。
#20
I like the idea of seriously punishing outsourcing.
You would. The only recourse your victims have is to leave. Of course you would like to punish that.

Guess what: you can't. Once someone leaves, they are outside the reach of your grubby thieving claws.
 

whiskeyguy

PR representative for Drunk Whiskeyguy.
Donator
#21
I like the idea of seriously punishing outsourcing.
You would. The only recourse your victims have is to leave. Of course you would like to punish that.

Guess what: you can't. Once someone leaves, they are outside the reach of your grubby thieving claws.
Norm's dead on here. Companies outsource right now because it's too complicated/expensive to maintain all their business operations within the country and stay competitive. Punishing a company further only makes it more expensive, thus will lead to more outsourcing. It makes much more sense to give them incentives to stay. For example, a few corporations wanted to move foreign funds back into the US, and asked for a tax exemption on doing so. The government denied it, and those funds remained outside the US... when they could have been reinvested in our economy.

In most companies the most flexible expense is labor. Now imagine you raise taxation or regulation on those companies, which makes it more expensive for them to operate. They have to cut expenses somewhere. Now to an extent this can be done with new efficiency measures, but the best way to cut expense is labor. Either cut wages/benefits, employ one person to do the work of two, or employ one person overseas to do the work of one American for less.

You think you can "punish" them by making it more expensive to operate, but they will "punish" us right back by outsourcing. A corporation cannot simply take a hit in profits, because then the shareholders (owners) won't reinvest in that company. Without capital, you can't turn a profit. The company will fail (in an obnoxious example) and many people would still lose their jobs.
 

Josh_R

Registered User
#22
Offer a real counterargument and not a talking point. China has its currency artificially devalued; it is out main economic problem and nobody will touch it (aside from education quality and costs). We cannot compete with that, period. On our current path the government will be supplying all of the jobs and just keep printing money and borrowing until the dollar is worthless. Please tell me how our current free-trade magic will prevent that?

Rising costs will be an acceptable side effect.
It's not a talking point, dummy. It's a fact. it is great that China is subsidizing its economy. That means they are wasting their own money to sell us cheaper goods. We win. Yes we lose jobs, but you are obviously not aware of the concept of comparative advantage.
In economics, the law of comparative advantage refers to the ability of a person or a country to produce a particular good or service at a lower marginal and opportunity cost. Even if one country is more efficient in the production of all goods (absolute advantage) than the other, both countries will still gain by trading with each other, as long as they have different relative efficiencies.[1][2][3]
For example, if, using machinery, a worker in one country can produce both shoes and shirts at 6 per hour, and a worker in a country with less machinery can produce either 2 shoes or 4 shirts in an hour, each country can gain from trade because their internal trade-offs between shoes and shirts are different. The less-efficient country has a comparative advantage in shirts, so it finds it more efficient to produce shirts and trade them to the more-efficient country for shoes. Without trade, its opportunity cost per shoe was 2 shirts; by trading, its cost per shoe can reduce to as low as 1 shirt depending on how much trade occurs (since the more-efficient country has a 1:1 trade-off). The more-efficient country has a comparative advantage in shoes, so it can gain in efficiency by moving some workers from shirt-production to shoe-production and trading some shoes for shirts. Without trade, its cost to make a shirt was 1 shoe; by trading, its cost per shirt can go as low as 1/2 shoe depending on how much trade occurs.
The net benefits to each country are called the gains from trade.
We have lost our comparative advantage in manufacturing. Our country needs to find a new industry in which we have a comparative advantage.

Here is an example: Obama wants to "compete" with China in the "green" economy. If China can make a solar panel for $50 and they sell it to us for $75, but an American company can only make it for $100 and sell it for $150, then one of two things have to happen: The government either subsidizes the cost to the tune of $75/panel OR they impose a tariff on the Chinese panel for $75 so that our panels are competitive. Either way the American people pay the difference and we are worse off for it.
 

Cleon

Ya blew it
#23
We have lost our comparative advantage in manufacturing. Our country needs to find a new industry in which we have a comparative advantage.
This this this. China is in the prime of their industrial age, why would you want to push the US back 50 years by trying to compete with that? Enough with that protectionism crap and trying to push manufacturing, were in the information age for a reason.
 
#24
The corporate tax affects how a company can hire and pay people.

The income tax affects whether CEOs can buy this year's Lamborghini or last year's model.
And a guy with an S Corp pays personal income tax. Guess who actually drives the economy. It's not the evil CEO you've been indoctrinated into hating.
 

jnoble

Lingering longer for a longering linger
#25
When Obama (or any liberal Democrat for that matter) suggests lowering a tax rate there is ALWAYS a catch involved, usually raising or creating another tax elsewhere.
 
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