There’s scant agreement on anything on Capitol Hill, so when a consensus comes along, the smart thing to do is seize it. Democrats and Republicans have come around to the view that Congress could kick competitiveness up a notch if it lowered the corporate income-tax rate. A bill to get this done ought to be a no-brainer, but President Obama’s agreement comes with a catch.
In his speech Tuesday at an Amazon.com distribution center in Chattanooga, Tenn., he proposed a grand bargain. “I’m willing to work with Republicans on reforming our corporate tax code,” he said, “as long as we use the money from transitioning to a simpler tax system for a significant investment in creating middle-class jobs.” In other words, he’ll concede to a rewriting of the unnecessarily complex business-tax code to lower corporate tax rates and to close corporate tax loopholes as long as the new revenues go toward “investment.” That’s his code word for blowing it all on something big and expensive.
We’ve tried this before. When Mr. Obama assumed office in 2009, Congress spent $831 billion on a stimulus package that didn’t stimulate. Unemployment is still high, and it would be higher if a lot of people hadn’t given up. A Mercatus Center survey identifies one of the reasons the stimulus didn’t stimulate is that most companies took the money and poached skilled employees from other companies. This did nothing to take people out of the unemployment line.
Congressional Democrats finally understand that they eventually must do something about it. After six years of Obamanomics, they know they’ll have a hard time blaming President Bush (or even Herbert Hoover) for the sorry state of the economy. That’s why many Democrats have warmed to the idea of reducing the corporate rate. At 40 percent, U.S. businesses pay more to the tax man than businesses in any other major industrial country. Japan is well into a second decade of what’s called the “Lost Decade.” Two years ago, it began to do something about it, dropping the corporate-tax rate from 41 percent to 38 percent.
The rest of the industrialized world has followed. Companies in Canada pay 26 percent (down from 36 percent), while the overall average in Europe is 21 percent. Even countries with not-so-free economies have lower rates: China’s is 25 percent (down from 33 percent), and Russia’s top rate is just 20 percent (down from 24 percent). Our 40 percent rate tells businessmen they’re better off setting up shop somewhere else.
Under the pressure of his re-election campaign, Mr. Obama proposed a corporate-rate cut without the spending strings attached. His new demand suggests that he was never serious about it, because Republicans in the House will never add more billions to the $3.8 trillion a year the government is already spending. The president says he’s willing to attend the patient only if he can bring his poison pills with him. That’s not very reassuring.
The Washington Times