Sometimes, something is so obvious even the left has to admit it. US companies have long suffered under one the highest corporate income tax rates in the world. In April the disparity will get worse, as Japan is set to lower its corporate tax rate to below the U.S.
Even Barack Obama recognizes this is a problem and today announced a plan to lower the corporate tax rate.
Treasury Secretary Timothy Geithner said Wednesday the current business tax system is bad for business and for job-creation and argued that President Barack Obama’s plan to reduce corporate tax rates to 28 percent would make the tax system more globally competitive.
So, even a leftist administration is admitting that high tax rates hurt competitiveness and dampen job creation. Can someone send some smelling salts to Paul Krugman and the palace guard at MSNBC?
As with virtually every Obama proposal, the plan announced today is devoid of any details or specifics. There is the standard talk of “broadening the base”, “closing loopholes”, and ending special tax credits and deductions. These can be either good policy or back-door tax hikes. I have a pretty good idea where the Obama Administration would prefer to come down on that question.
That said, Obama’s announcement today contains two powerful admissions:
1. Tax rates matter. Obama’s proposal was made on solid economic grounds. The Administration is arguing that lower tax rates will boost global competitiveness and foster greater job creation. The admission, from a leftist government, that lower tax rates improve economic performance is groundbreaking.
2. Class-warfare is a political loser. For the past six months, the left and the media (but, I repeat myself!) have subjected the American public to class-warfare and the politics of envy. They have harangued us about the evils of the wealthy and corporations. And yet, on the eve of the Presidential campaign, Obama has decided its better to be seen lowering corporate tax rates…even for corporations.
Now, I have no doubt Obama will soon renew his push for higher individual tax rates. And, I also have no doubt that Obama wouldn’t prefer to have much more revenue filling government’s coffers. But, we also know that Obama, above all else, wants to be reelected. And this calculation has spurred him to propose boosting the economy with lower corporate tax rates.
It may very well simply be political theater. But, its theater playing from a free market script.