Apr 19 2012
“The whole concept of corporate tax reform,” President Obama said on announcing his new plan to accomplish the task, “is to simplify, eliminate loopholes, [to] treat everybody fairly.” It is a theme he has repeatedly emphasized: making the tax code more equitable so that everyone pays their fair share. But like most of the president’s initiatives, the rhetoric does not reflect the reality.
Far from making the corporate tax system “fair,” the president’s corporate tax plan punishes smaller businesses, worsens the punitive double taxation of American companies that operate overseas, and, at a time when gas prices are spiking, selectively hikes taxes on American oil producers.
Fairness in the market means companies compete on a level playing field, and no one receives special treatment. The president’s idea of fairness is just the opposite, relying on market manipulation and picking winners and losers. His budget and corporate tax reform plan are chock-full of examples of special treatment, subsidies, and regulatory manipulations designed to determine outcomes. President Obama believes he can control markets by taxing Americans and deciding for himself how to allocate revenue, rather than letting us decide what to do with our own money in the free market.
Far from being “fair”, the president’s plan discriminates against family-owned smaller businesses by only reducing the tax rate for big corporate employers. For the 30 million sole proprietorships, partnerships, LLCs, and S-corporations that face taxation at the individual rates, their tax rate goes up from 35 percent today all the way to over 40 percent next year. For a president who claims to look out for the little guy in the face of predatory corporate greed, this tipping of the scales in favor of big business contradicts his rhetoric.
Further, with prices at the pump soaring and consumers and businesses across the nation feeling the squeeze, the President’s corporate tax plan will push gas prices even higher. What Democrats refer to as “special tax breaks for Big Oil” are, in reality, deductions that are available for all companies engaged in manufacturing or production activities. The president’s plan would eliminate this tax deduction for oil companies but leave it untouched for everyone else; a classic case of picking winners and losers.
Moreover, the revenues gained by eliminating these deductions are completely lost on a plan that showers new carve-outs for so-called “green energy” producers in yet another attempt to artificially boost consumption of products and technologies that no one seems to want.
The Obama Administration is explicit about their aim to spur green energy development through selective “investments” (aka subsidies). The plan continues the disastrous support for corn-based ethanol biofuels, at a price tag of $30 billion over the next five years. Another example is the special subsidy for electric cars, with the goal of putting one million on the road by 2015. For President Obama, government “investment” is preferred to letting the consumers decide where they want to invest their money because the American people might make the “wrong” choice.
And what happens to workers in the industries affected by picking winners and losers? President Obama’s corporate tax plan operates under the false notion that all blue-collar jobs are interchangeable. A worker employed as an oil rig technician for the last two decades cannot transition overnight to a job maintaining green-energy windmills at a wind farm, or putting together solar panels. Not only does this demonstrate that the president is painfully unaware of how specific training, expertise, and experience determine qualifications in the real job market, it shows that he is hardly interested in the effects his “transformative” policies will have on the lives of real workers and families.
When the president claims he wants “to treat everybody fairly,” what he means is he wants to tilt the tax code in favor of those industries and businesses he supports. In order to foster greater market competition, he should be reducing, not creating, special interest loopholes, as well as lowering rates and removing the incentives to keep profits overseas. It would send a positive message through our economy and lead to greater productivity and job creation.
Mike Lee is a U.S. Senator from Utah and a member of the Joint Economic CommitteeOp-ed originally published in Townhall