There is widespread agreement that the U.S. can become more competitive in the global marketplace if it lowers its corporate tax rate. There's also a consensus that the nation needs to spend more money on its vital infrastructure. So one might assume that a proposal to accomplish both — and one that would create thousands of jobs without adding to the deficit — would be greeted with a roar of approval.
Hah, where have you been? The latest "grand bargain" President Barack Obama announced in Chattanooga, Tenn., on Tuesday drew immediate opposition from Republicans. Rep. Paul Ryan labeled it a "raw deal." Senate Minority Leader Mitch McConnell called it a "tax hike" that would hurt the economy. A spokesman for House Speaker John Boehner announced his opposition five hours before President Obama could even open his mouth in Tennessee.
No suggestions that maybe this ought to be mulled over or amended, no offer of negotiations, no counter-proposals. GOP leaders were anxious to go on the record to give the customary "reject out of hand" reaction that has defined this do-nothing, partisan Congress. Their message was that the tax cut wasn't "serious," that it was too left-wing and ultimately unhelpful to middle-class families and small businesses.
We won't act shocked that it happened. Frankly, it would be shocking if Republicans had behaved any differently. But it's still disappointing that a party that claims to seek prosperity for all Americans can act so fundamentally against that goal. Not that Mr. Obama's proposal is a ticket to full employment, but it clearly would be helpful in improving still-lackluster jobs numbers — with the added benefit of addressing corporations that avoid taxes on overseas earnings.
What the president proposed is not really a grand bargain so much as a modest starting point. He would lower the corporate tax rate from 35 percent to 28 percent but close loopholes. Some businesses would end up paying less, some — especially those with overseas assets — would pay more. With that additional income, Mr. Obama would finance investments like roads, bridges, job training and other jobs-related spending.
Reaction in the business community was predictably mixed because some would be helped, some hurt and others unaffected. Small businesses, many of whom file as individuals and therefore pay no corporate tax, mustered little enthusiasm. Others questioned diverting the added revenue to new spending (even, apparently, if it would stimulate the economy and upgrade infrastructure they need to do business). Much of the criticism focused on the fact the tax "reform" wasn't sufficiently comprehensive.
But that last criticism — that it's not far-reaching enough — seems downright comical considering how Washington can't seem to find bipartisan support to achieve the simplest goal. Why is there any expectation that a bigger lift, like reforming the entire tax code, is somehow more achievable? It's certainly easy to be absolutist about taxes and spending, but sorry, Business Roundtable, that doesn't advance the cause of lowering tax rates. It's also amusing to hear Republicans oppose lowering the corporate tax rate without lowering the individual tax rate while also attacking the corporate tax plan for not going low enough.
Certainly, President Obama can't claim this is particularly innovative. He offered a similar proposal last year (without a plan for how the revenue would be used). And Republicans may even be right that his announcement — part of an economic policy tour this summer — was made with an eye on 2014 and a desire to show where Democrats and Republicans differ, particularly on the issue of the estimated $2 trillion in foreign profits tucked away overseas.
But so what? Simultaneously lowering the corporate tax rate and addressing the nation's aging infrastructure — a worsening problem just as serious as the enormous federal deficit — remains worthwhile whether there's a political dimension to it or not. And even suggesting the plan might be budget neutral is probably unfair. Capturing offshore revenue and putting it back into the U.S. economy by way of community colleges or road repair crews should actually reduce the deficit as new jobs are created.
Any rewrite of the tax code is fraught with peril. (That's one reason we don't have a lot of confidence in the ongoing efforts by Senate Finance Committee Chairman Max Baucus and House Ways and Means Chairman Dave Camp to negotiate a deal on that front). But the track House Republicans have the nation on now — toward a budgetary stand-off that could lead to a government shutdown in October — seems far more problematic than any modest win-win corporate tax compromise could possibly be.