Like the Republicans, President Barack Obama recognizes that our high corporate-tax rate puts U.S. companies at a disadvantage to their foreign competitors.
You might think, then, that the administration’s recent announcement of a “framework for business tax reform” created a rare opportunity for a bipartisan improvement to our policies. You would be wrong.
What’s emerging as the biggest obstacle to a deal is the opposition of Republicans’ small-business supporters to a corporate-tax reform that ignores the rest of the tax code.
Republicans on Capitol Hill – and business lobbies such as the Chamber of Commerce and the Business Roundtable – raise three objections.
First, they think he should lower the corporate-tax rate more. Going to 28 percent from 35 percent is good, but would leave the U.S. rate above the developed world average.
Second, many object to the president’s proposals for tax breaks for manufacturers as unfair and distortionary.
Third, they disagree with how the administration wants to treat multinational companies based in America. President Obama wants to subject their foreign earnings to some unspecified minimum tax. Republicans think the main effect of this tax will be to help multinationals based in other countries out-compete our companies in foreign markets.
Sen. Rob Portman of Ohio, the Senate Republicans’ point man on jobs, wants to move ahead with corporate-tax reform. But few on Capitol Hill are as optimistic as he is. Most of them agree with Rep. Dave Camp of Michigan, the chairman of the House Ways and Means Committee, who believes that corporate taxes should be addressed as part of a larger tax reform that brings rates for individuals down, too.
So reforming taxes on corporations is likely to remain one of those topics that a lot of people talk about, but nobody does anything about. •