President Obama's "Jobs Council" today released their annual report. In the tax section, much attention is given to the need to cut the corporate income tax rate.
Reading most of the report, it sounds like something that might be written by ATR or another free market organization. It points out how the U.S. has the highest corporate income tax rate in the developed world, a full 14 percentage points higher than the OECD average of 25 percent. It also points out how big U.S. trade partners like Japan, Canada, and the United Kingdom are continuing to cut their corporate rate while the U.S. falls behind by standing still.
The report mentions flow-through companies like partnerships and S-corporations, and says that business tax reform must take these into account. Another sound point.
In a shocking development, the report also endorses "territoriality," where the U.S. would stop seeking to tax income earned overseas. A lower corporate and flow-through rate combined with territoriality is strong, pro-growth medicine. Where is the leadership from President Obama on this?
That being said, there are a few quibbles with the report:
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It treats all corporate tax deductions and credits as if they are the same. Some tax deductions are not good tax policy and are good candidates for repeal in revenue-neutral, comprehensive tax reform. Others, however, are not loopholes at all--they are part of a consumption tax base, which is the ideal tax base in a reformed system. A good example of this is moving from depreciation to full business expensing.
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Speaking of first-year full expensing, the report makes no mention of continuing this Obama Administration policy. It's one of the few good tax measures this President has supported and signed into law, and it should be made permanent.
- The report implies that a net tax increase would be an acceptable price to pay for business tax reform. It would not be.
All in all, not bad for a tax document coming out of the Obama Administration. The question is, will the political appointees at the White House listen to what these business experts are telling the President?
What do you think? Should President Obama endorse his own expert commission's findings?
on Tuesday, January 17, 2012 12:16 PM ESTTo follow Ryan Ellis's RSS feed click here. To follow them on Twitter, their handle is @ryanlellis