Why Corporate Tax Cuts Are Wrong

Robert Reich:

In sum, Obama’s proposed corporate tax cuts (1) won’t generate more jobs because they don’t put any cash in worker’s pockets (as would, for example, exempting the first $20,000 of income from the payroll tax and making up the difference by applying the payroll tax to incomes over $250,000); (2) will subsidize companies to cut even more jobs; and (3) will cost $130 billion — money that could better be spent helping states and locales avoid laying off thousands of teachers, fire fighters, and police.

So why is Obama proposing them? To put Republicans in a bind. If they refuse to go along he can justifiably say they have no agenda other than obstruction. After all, the only thing they’ve been arguing for is lower taxes. On the other hand, if Republicans agree to support these corporate tax cuts, Obama can claim a legislative victory that will help Democrats neutralize their opponents in the upcoming elections.

The proposals also make it harder for Republicans to argue the Bush income tax cuts should be extended for the richest 3 percent of taxpayers because small businesses need it. Obama’s corporate tax cuts would appear to do the trick.

The White House probably figures even if Republicans agree to the proposed tax cuts, nothing will come of it. Congress will be in session for only about two weeks between now and the midterm elections so it’s doubtful these proposals would be enacted in any event.

But this cynical exercise could backfire if Republicans call Obama’s bluff and demand the corporate tax cuts be put on a fast track and get signed into legislation before the midterms.

More troubling, Obama’s whopping proposed corporate tax cuts help legitimize the supply-side dogma that the economy’s biggest obstacle to growth is the cost of capital, rather than the plight of ordinary working people.

3 thoughts on “Why Corporate Tax Cuts Are Wrong

  1. The corporations will only save the money, either park in a bank or use it to acquire companies and reduce staffs even more. Many corporations already pay little or no tax; tighten the loopholes, raise their rates, make them pay if they don’t hire.

  2. I read elsewhere that there are no restrictrictions on the capital investmenst in terms of doing then in the US, so that the jobs involved in it will also be here in the US. A company can put up a new plant or buy new equipment for its plants in China or Thailand or wherever there’s Cheap Labor.

    Anyone have info on this issue?

  3. Purple Girl — I heard on NPR that nations all over the world are reducing taxes on their businesses to try to undercut nations which do tax their businesses. Cheap Labor AND Cheap Taxation on Businesses. Repub wet dreams, coming true.

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