In his State of the Union speech on Tuesday night, President Obama will propose a net tax increase on American employers.

Dusting off a “corporate tax reform” plan from his 2012 campaign, the President will propose raising taxes on all employers while cutting rates for only the largest companies. Here’s how the plan works:

The President’s plan is a net tax increase. According to reports, the “offer” President Obama is making is to raise net taxes on employers, and use some of the tax increase revenue windfall to pay for Democrat-aligned union construction projects. The Republican House would never support a net tax increase, and using the money to fund Big Labor (and, by extension, Democrat campaign coffers) is hardly a sweetener. 

This “new” plan simply dusts off an unserious 2012 Obama campaign document. Back in 2012, President Obama’s re-election campaign put out a brief and rhetorical “corporate tax reform” plan. It was largely ignored at the time by serious policy analysts, but the Administration has done nothing to develop it in the intervening two years. ATR did analyses of the plan in 2012 and 2013. The plan raises taxes on all American employers, but only gives partial rate relief to the largest multi-national companies.

The plan leaves much to be desired:

Cutting the corporate rate to 28 percent will only help very large companies. According to IRS data, 32 million businesses file tax returns every year. Fewer than two million of them are corporations. These businesses tend to be the largest companies in the world. While their tax rate is too high, most successful employers pay an even higher tax rate.

Most American employers don't pay the corporate income tax. Most companies in America file and pay taxes using the individual tax rates. President Obama has already raised the tax rate paid by successful small and medium-sized businesses (via the fiscal cliff and Obamacare’s Medicare payroll tax rate hike). Taken together, this means that most employers face a top rate of close to 44 percent, plus state taxes. This is even higher than the 39 percent corporate income tax rate faced by large corporate firms.

The President’s plan only cuts taxes for multinational corporations, while raising taxes on Main Street businesses. Why does President Obama think it's a good idea for multi-national, giant corporations to pay a 28 percent tax rate while Main Street small employers continue to pay a 44 percent rate? All businesses lose their existing deductions and credits, but only the largest companies get rate relief in exchange. That's not fair, and it's not tax reform.

Even a 28 percent corporate rate is too high. According to the OECD, a 28 percent federal corporate rate (more like 32 percent after state corporate income taxes are factored in) would still be higher than every one of our major trading partners except Japan and France. We would still have a higher corporate income tax rate than major trade partners like Canada, Mexico, the United Kingdom, or Germany. The new rate would still be higher than the developed nation average of 25 percent.

Doubles down on international double-taxation. The U.S. is one of the only countries left in the world which seeks to tax the worldwide income of her companies (on top of income taxes already paid overseas). The smart tax reform move would be toward a territorial system, where only U.S.-source income is taxed (as Obama's own jobs commission recommended). This could be transitioned into with a round of repatriation

Rather than embracing this common-sense and globally-accepted idea, the Obama Administration wants to make the double taxation worse by imposing a global minimum tax rate. They also want to take away several of the tax provisions in law today which make this international double-taxation regime bearable for many companies.

Raises the cost of capital across the board. The Administration plan lengthens depreciation lives, which discriminates against business investment. The proper policy is permanent full business expensing. Businesses should be able to deduct the cost of all business inputs in the year incurred. Lengthening depreciation lives (and, likely, amortization periods) uses inflation and the time value of money to steal these ordinary business deductions. A deduction delayed is a deduction denied. More importantly, it incents business to consume rather than to invest in new plant and equipment.

Raises taxes selectively on producers of American energy. For a plan that claims to abhor "picking winners and losers," the Administration outline sure does pick one loser–energy producers. It reads them out of the Section 199 exclusion, repeals LIFO, curtails legitimate cost recovery, and increases the double taxation of international income (a sore point for the industry). Why is it a good idea to raise the cost of energy for every American family?

It is ironic that an administration lately focused on income inequality would put forward a tax plan which provides rate relief only to the largest multinational companies while raising taxes on small businesses.