The big news today is that President Obama is going to propose reducing the corporate tax rate to 28%, which is still higher than the average of other nations. He wants to be seen as a tax cutter leading up to the next election. But you know there’s a catch, there always is with Obama.
In his proposed rewrite, Obama will target oil and gas companies for tax hikes while promising special breaks for manufacturing companies, according to a senior administration official.
Gee, who would the oil and gas companies pass those higher taxes along to? Could it be consumers? But as William Teach pointed out, it’s all about keeping the unions and the greenies happy.
Obama also wants to drastically increase the dividend tax rate to 39.6%. Currently dividends are taxed at the same rate as capital gains – 15%. The Wall Street Journal notes that a dividend tax hike will hurt the middle class and retirees especially hard.
If you reverse the policy, you reverse the incentives. The tripling of the dividend tax will have a dampening effect on these payments.
Who would get hurt? IRS data show that retirees and near-retirees who depend on dividend income would be hit especially hard. Almost three of four dividend payments go to those over the age of 55, and more than half go to those older than 65, according to IRS data.
But all American shareholders would lose. Higher dividend and capital gains taxes make stocks less valuable. A share of stock is worth the discounted present value of the future earnings stream after taxes. Stock prices would fall over time to adjust to the new after-tax rate of return. And if investors become convinced later this year that dividend and capital gains taxes are going way up on January 1, some investors are likely to sell shares ahead of paying these higher rates.
The question is how this helps anyone. According to the Investment Company Institute, about 51% of adults own stock directly or through mutual funds, which is more than 100 million shareholders. Tens of millions more own stocks through pension funds. Why would the White House endorse a policy that will make these households poorer? (Read More)
Peter Suderman summed it up pretty well.
So the Obama administration’s proposal to reform the corporate tax code is a tax cut that will probably result in a net tax hike, and a tax simplification that will include the creation of new loopholes.
Also be sure to read James Pethokoukis’s analysis of the proposal. This plan would increase taxes on businesses by billions, while still leaving us with one of the highest corporate tax rates in the world.
Addendum: Ed Morrissey picked up on the “global minimum tax” that’s included, and how Obama claims to bring about “greater fiscal responsibility.” Ha!
Again, the trick is to “seem fair” while he is really trying to boost the taxes Americans have to pay so he can buy more votes.
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And I bet that Boehner or Cantor will say or have said “this is another tax and spend” program by the president that will appeal to a few voters, but will not offer any solutions to the problems we have today.
Instead they could put him on the defensive by telling the public they welcome reforms to the tax code, but what the president proposes is not reform, it is adding to the bloated and incomprehensible tax laws we have today and that the house is announcing a reform package to streamline the tax code and make it more far and balanced than what the president has offered. Then close by saying they look forward to working with the president on these reforms.
Put Obama on the defensive for once and let your defensive team have a rest. I find it difficult to understand how the Reopublicans in the house have let Obama take control to the point he can run on a do nothing congress where Reid is blocking all legislative action Obama does not support and the people are buying into this crud. The republicans need a good PR consultant to get them on the right track when it comes to playing politics with Obama.
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Its all about pandering to his unhinged progressive base while attempting to sound moderate and reasonable to voters not familiar with issues.
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[...] decent person.In related news, Romney released more details on his tax plan today. (No wonder Obama came out with his own tax plan this morning.) It’s not especially bold, but I do like the part about bringing some certainty [...]
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[...] 2009The examples are countless.-Recycled speeches-Algae-Inflate your tires-Boeing-Five More Years-TaxesThose last five are just from this week! I could go on and on. Instead, I’ll simply advise [...]
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