Fresh off last week’s Protestant Reformation (or Secular Inquisition, depending on your propensity for melodrama), the Obama administration pivoted to jobs and unveiled a new corporate tax plan crafted by treasury secretary and former Gringotts Wizarding Bank branch manager Timothy Geithner.
The new plan proposes lowering corporate tax rates from 35 to 28 percent across the board. This alone doesn’t tell us much, however, because the current 35 percent figure is the nominal rate — the number on the books before all the deductions and subsidies are factored in. For instance, after accountants were finished punching the very last equals sign last year, total corporate taxes were only 12 percent of profits — significantly less than the nominal 35 percent rate.
Though the plan argues for lowering the nominal rate, it would also eliminate the multifarious loopholes and subsidies in the existing corporate tax code that are responsible for the massive gap between nominal and effective rates and have led, the administration argues, to economic “distortions that hurt productivity and growth.”
Strange, then, that the plan — in its very next paragraph — inexplicably proposes carving out a brand new subsidy/loophole that would create a special effective tax rate for manufacturing sector corporations, dropping the proposed 28 percent nominal rate even further to “no more than 25 percent.”
The inconsistency is obvious — “distortions hurt economy, subsidies create distortions; therefore, let’s create a new subsidy!” And not just any subsidy, but a subsidy for the manufacturing sector, which Republicans won’t hesitate to characterize as a payout to unions. Here, I’ll just do it for them to get it over with: “This President says he wants to stop distorting the economy, but he’s happy to distort the economy even further — so long as it helps his cronies in the United Auto Workers.”
So effective is the plan at exposing its own vulnerabilities that one begins to suspect it may secretly be the first step in a government takeover of criticism.
As a final insult, the plan concludes by promising to simplify tax filing for small businesses “so that they can focus on growing their businesses rather than filling out tax returns.” Thank you, Obama administration, for taking all the paperwork out of running a small business. Now I can finally throw away my reading glasses and replace all the sales contracts, invoices, loan documents, commercial leases and regulatory compliance logs with various gentlemen’s agreements, firm handshakes and unwavering eye contact.
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