Obama’s Revisits Re-Election “Fairness” Theme with Corporate Taxes; Santorum Brings Conservative Bad Boy Appeal to Debate
Tax ‘Fairness’ is in the Eye of the Beholder
"The effective tax rate on the energy industry in the United States today is much, much lower than the average. It's lower because the tax code provides a substantial amount of subsidies to those private companies. We propose, for lots of reasons, mostly because we think it's fair and more efficient, to dial some of those back."
-- Treasury Secretary Timothy Geithner testifying before the House Ways and Means Committee last week about the president’s plan to raise taxes on energy companies.
President Obama’s economic team is proposing a reduction in the U.S. corporate tax rate from its current 35 percent, the highest rate in the developed world, to a 28 percent, which would put America on par with some European nations.
But the president, in keeping with the fairness doctrine central to his re-election campaign, wants the lower tax rate should be part of a plan to actually increase the total amount of money that corporations pay the government.
This money, reportedly an additional $250 billion over 10 years, would come from higher rates and closed loopholes on businesses seen as undesirable by the Obama Democrats, including American firms with large operations overseas and certain energy firms which produce fuels blamed by environmentalists for global warming.
Under the Obama plan, the new taxes would be used to fund government outlays to encourage a more equal distribution of wealth either as direct government spending or in the form of tax subsidies given to businesses seen as desirable by the president, like manufacturing firms making products that comply with pending and proposed environmental rules.
Republicans have been clamoring for a tax-code simplification since administration officials first began flirting with the idea publicly more than a year ago. Most Republicans have been calling for a revenue-neutral tax overhaul for businesses and individuals in which loopholes are closed but overall rates are brought down.
This relates to a central complaint from business leaders and economists: the warren of loopholes and deductions added over the span of decades, particularly since the tax simplifications of the Reagan era, as economic incentives have had the reverse effect. Wealthy and politically connected companies can avoid nearly all taxation through creative accounting and lobbying, while less influential firms are left to pay the bill. The very cost and distraction of tax avoidance, meanwhile, saps billions of dollars from potentially productive enterprises.
Though a long-term problem, it became a political liability for the president when it was revealed last year that General Electric, a major government contractor led by one of Obama’s top economic advisers, Jeffrey Immelt, paid no taxes at all on 2010 profits of $14.2 billion by taking advantage of various federal incentives and deductions.
What Obama is now proposing is not the simplification Republicans have long sought. He will instead propose raising the effective rate on those firms he considers bad and lowering it for those firms he thinks good. The current warren of loopholes would be wiped out, but replaced with a new, simpler set of incentives and penalties more in keeping with the president’s societal goals and election theme.
The 28 percent baseline Obama rate would still be among the highest in the developed world, but on par with nations like Germany, Norway and Sweden. The rate would be substantially higher than that of Britain, Switzerland, Russia, and almost all of the Eastern European nations. The rate for preferred industries would be as low as 25 percent, the same as China. It is unclear how high the rates would be for firms thought undesirable.
The Obama tax plan stands little chance of passage, even in the Democratically controlled Senate, owing to parochial concerns, the efforts of corporations to protect existing loopholes and subsidies and the standard election-year aversion among politicians to any significant action. The major aim here seems not to be passage but to be to push back against the common public perception that Obama’s policies have retarded economic growth.
The message today is that a second Obama term would bring many new opportunities for certain businesses, with those opportunities financed by new levies on businesses liberals say are to blame for income inequality and ecological degradation: “built to last” growth financed on the business equivalent of sin taxes.
There’s also a political consideration in the fact that the president is proposing raising taxes on people who sell gasoline at the exact moment that gasoline prices are roaring toward $4 a gallon. Obama will presumably try to head off some of that in an another campaign swing through Florida later this week. He is expected to tout his energy policy, which he says can hold down gas prices and slow global warming by directing public funds and tax subsidies to environmentally sensitive energy sources.
This tax talk will also shake up the Republican race a bit.
Former Massachusetts Gov. Mitt Romney’s own personal tax rate of 15 percent has become a target for Democratic complaints about the tax avoidance of the wealthy, or “1 percent” as they are called on the left.
In order to combat that narrative and to quell some of the grumbling on the right about the class-conscious timidity of his initial tax plan, Romney will rebut Obama’s plan today with a new tax strategy that Romney advisers say will be focused on “flatter, fairer” policy in order to spur growth across all economic sectors. The plan is part of Romney’s bid to re-establish his brand as an economic turnaround artist.
(No word on whether Romney’s already stated plan to unveil his new take on taxes this week spurred Obama to act now or whether Romney knew Obama was ready to drop his long-awaited policy and opted to get out in front. Campaigns love this cloak and dagger stuff.)
It also presents an opportunity and a risk for former Pennsylvania Sen. Rick Santorum, who stole a march on Democrats early this cycle by snatching their idea of tax subsidies and incentives for manufacturers. Democrats have been nibbling around the edges of the tax code for decades in an effort to revive the manufacturing sector, but Santorum one-upped them by proposing zero taxes on manufacturing concerns. It’s been a popular proposal in Rust Belt states where Democrats have long succeeded by promising government aid to revive manufacturing, in decline for nearly 40 years.
Obama’s program will allow Santorum to point out that his idea is 100 percent more aggressive since it would eliminate taxes on the same sector Obama’s proposal purports to help. It will also, however, allow Romney, as well as rivals Newt Gingrich and Ron Paul, to yet again point out that Santorum’s plan involves picking winners and losers.
Souped Up Santorum Rockets into Ariz. Debate
“I think a Tea Partier would find it very interesting that Rick Santorum voted to raise the debt ceiling five times without getting compensating reductions in spending. I think the fact that he continues to defend earmarks, including his $500,000 earmark to the Pittsburgh Zoo for a polar bear exhibit. I don’t think that’s consistent with the principles of conservatism. I don’t think Rick Santorum’s track record is that of a fiscal conservative.”
-- Mitt Romney campaigning in Shelby Township, Mich.
Rick Santorum rolls into tonight’s CNN debate in Arizona fueled by a surge in conservative support as the right rallies behind his defiant tone and rebellious attitude toward the establishment press and political correctness.
Santorum was talking about changes to entitlement programs when he boasted to Arizona voters on Tuesday that he was “riding the third rail on a skateboard,” but that sums up a lot of his current surge.
Much as Newt Gingrich and Herman Cain before him, Santorum is running as the conservative bad boy – the one unafraid of a fight with President Obama and the press – while former Massachusetts Gov. Mitt Romney plays it safe.
Romney has refused to back down in the face of scrutiny on shock quotes played up by detractors -- e.g. Obama’s “phony theology,” comparing the current peril to the United States to the one posed by Hitler and Tojo, etc. – as well as the clips of speeches and interviews past.
Santorum compared his address to students at Ave Maria University, an orthodox Catholic school in Florida, in which he said that Satan was systematically targeting American institutions, including mainline Protestantism and academia, to Ronald Reagan’s 1983 speech that called the Soviet Union an “evil empire.” On his belief that women using contraceptives was bad for the nation, Santorum has stood firm saying it would be legal in his presidency even if it was something he personally opposes.
Santorum’s third-rail skateboard ride brings him tonight back to the debate stage where he will likely take plenty of heat from his rivals not on the issues that has so excited the establishment press. They will instead talk about Santorum’s record on spending, labor unions, gun rights, etc., the former senator’s weak spots to the right.
But moderator John King will surely throw some hanging curves for Santorum to hammer on contraception, Nazism, Obama’s theology and/or the Devil just as he served up a juicy meatball for Gingrich in South Carolina.
Like Gingrich before him, Santorum faces a high risk, high reward situation in this debate. He can’t let down the supporters who see him as unapologetic social conservative, but he also risks reinforcing doubts about his electability among Republican voters who may mostly agree but worry about how such a candidate will play among moderate independents.
For Santorum everything about tonight is big: Big expectations, big opportunities and big risks.
Chris Stirewalt is digital politics editor for Fox News, and his POWER PLAY column appears Monday-Friday on FoxNews.com.