1. The Obama-Geithner plan would lower the statutory corporate tax rate to 28 percent from 35 percent, currently the second-highest among advanced economies. But that would still leave the combined U.S. corporate tax rate — state and federal — at 32.2 percent, far above the OECD combined average of 25 percent. The U.S. combined rate would be a bit below slow-growing Japan and France but above the U.K. and Germany. That’s not nearly good enough. Canada just lowered its corporate tax rate, for instance, to 15 percent.
2. The Obama-Geithner plan would establish, according to the New York Times, a minimum tax on multinational corporations’ foreign earnings to discourage “accounting games to shift profits abroad” or actual relocation of production overseas.
3. To pay for the lower tax rate, Obama would eliminate ”dozens of tax loopholes and subsidies,” according to Politico. But some of the money would be used to “lower the effective rate on manufacturing to no more than 25 percent, while encouraging greater research and development and the production of clean energy,” according to the Times.
First, the effective manufacturing tax rate would be higher than 25 percent once you add back state taxes. Second, the White House is sticking to its clean energy agenda agenda even as other advanced economies like German and Spain are abandoning such wasteful subsidies. Again, this is ideology trumping economic reality.
4. Obama and Geithner apparently still don’t understand how harmful corporate taxes are. Here is the OECD: “Corporate taxes are found to be most harmful for growth, followed by personal income taxes, and then consumption taxes.”