Republican lawmakers blasted a proposal by President Obama on Tuesday to cut corporate taxes in exchange for more spending on job-training programs, calling it a revival of a failed plan that would raise taxes initially.
"It's just a further-left version of a widely panned plan he already proposed two years ago — this time, with extra goodies for tax-and-spend liberals," said Senate Minority Leader Mitch McConnell, Kentucky Republican. "The tax hike it includes is going to dampen any boost businesses might otherwise get to help our economy."
Mr. Obama visited an Amazon.com distribution center in Chattanooga, Tenn., to outline his proposal, which he called a "grand bargain" to create more middle-class jobs.
"I'm willing to work with Republicans on reforming our corporate tax code, as long as we use the money from transitioning to a simpler tax system for a significant investment in creating middle-class jobs," the president said. "That's the deal."
The president proposed cutting the corporate tax rate from 35 percent to 28 percent, with a further reduction to 25 percent for manufacturers. He proposed the same rate cuts in early 2012 during his re-election, without attaching the proposal to spend more on job training.
The U.S. corporate tax rate is higher than in many other industrialized nations. Germany's corporate tax rate is 29.55 percent and the overall average in Europe is 20.66 percent. Japan's rate is higher, at 38.01 percent; in Canada, the rate is 26 percent; in India, 32.45 percent.
Mr. Obama said the money gained from closing corporate tax loopholes should be spent on infrastructure projects, on job training and high-tech manufacturing hubs in which private industry collaborates with universities.
"If we're going to give businesses a better deal, then we're also going to have to give workers a better deal, too," he said. "The middle class was struggling before I came into office."
White House economic adviser Gene Sperling wouldn't say how much new tax revenue would be raised or what amount would be spent on job training, indicating those details would be left up to negotiators if the plan moves forward. Republicans said the proposal likely would raise tens of billions of dollars initially.
The move creates an awkward position for Sen. Charles E. Schumer, New York Democrat and member of the Finance Committee, who said last October that it was "imperative" for corporate tax reform to be revenue-neutral.
On Tuesday, Mr. Schumer said he supports the president's proposal and others that Mr. Obama is outlining in a series of economic speeches.
"While deficit reduction continues to be an important goal, more and more decision-makers are realizing that our greatest problem is the decline in middle-class incomes," Mr. Schumer said. "With these speeches, the president is adroitly and powerfully beginning to move the debate in that direction. It is both substantively and politically the right thing to do."
Mr. Sperling said corporate tax reform would be revenue-neutral in the long run, and that Mr. Obama's earlier proposals for corporate tax reform always envisioned a "one-time" increase in tax revenue.
"That money can't responsibly be used to lower rates because it doesn't sustain itself," Mr. Sperling told reporters.
As a sweetener, Mr. Obama also is proposing to permanently increase expensing to $1 million for small businesses for investments. Further, the president wants to expand an earlier proposal to create "manufacturing innovation hubs," with a goal of tripling the number of these centers to 45 over the next 10 years.
The president blamed "a certain faction of Republicans in Congress" — a reference to tea party Republicans — for hurting the economic recovery by "saying they wouldn't pay the very bills Congress racked up in the first place, and threatening to shut down the people's government if they can't shut down Obamacare."
"I don't want to go through the same old arguments where I propose an idea and the Republicans say 'no' just because I proposed the idea," Mr. Obama said. "I'm just going to keep throwing ideas out there to see if something takes."
He said the unemployment rate this year would be 6.5 percent, rather than the current 7.6 percent, if layoffs had not occurred as a result of "sequester" budget cuts.
Mr. Obama also belittled the GOP for promoting the construction of the Keystone XL oil pipeline, which unions and other supporters say would create tens of thousands of jobs.
"They keep on talking about an oil pipeline coming down from Canada that's estimated to create about 50 permanent jobs," Mr. Obama said, adding that the project "is not a jobs plan." In an interview last week, he said the oil pipeline project would create perhaps 2,000 construction jobs and called that number "a blip."
Karen Harbert, president of the U.S. Chamber of Commerce's energy institute, said Mr. Obama "continues to ignore his own administration's analysis and demean the value of thousands of American jobs for those that badly need them."
"An easy way to start creating jobs is to approve the Keystone XL pipeline and put 42,000 Americans to work, according to the U.S. Department of State," she said. "One thing is for sure: Delay, deny and duck is not a jobs plan."
House Republican leaders Tuesday also reacted negatively to the president's proposal, saying it doesn't represent a compromise in their eyes, and merely restates old proposals Mr. Obama has already tried to enact.
"The president has always supported corporate tax reform," said Michael Steel, a spokesman for Speaker John A. Boehner of Ohio. "Republicans want to help families and small businesses, too. This proposal allows President Obama to support President Obama's position on taxes and President Obama's position on spending."
Aric Newhouse, a vice president of the National Association of Manufacturers, said the president's proposal doesn't go far enough because it doesn't address small businesses.
"Solutions that pick winners and losers and increases the tax burden on businesses don't benefit manufacturers," Mr. Newhouse said. "Tax reform must account for the nearly 70 percent of manufacturers that pay taxes at the individual rate. Failing to include these important players in our job creation engine undermines the very point of tax reform — increased growth and competitiveness."
The president's proposal comes as he prepares to battle House Republicans in September on budget cuts and raising the nation's borrowing limit.
A House Republican leadership aide said that cutting corporate taxes from 35 percent to 28 percent or lower, while keeping the top individual tax rate at 39.6 percent, "would have a devastating effect on small businesses in America."
Ahead of the president's visit, Amazon announced Monday that it will hire about 7,000 more warehouse workers in 13 states, for positions that reportedly pay about $11 per hour.
The president also called, again, for Congress to raise the federal minimum wage from $7.25 to $9 per hour. It received one of the loudest cheers from the audience during the 31-minute speech.
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