By Jonathan Easley and Justin Sink - 07/30/13 06:19 PM EDT
President Obama on Tuesday asked Republicans to agree to lower corporate tax rates and increased infrastructure spending as part of what he called a “grand bargain for middle-class jobs.”
Obama’s plan would cut the corporate tax rate from 35 percent to 28 percent, with a preferred rate of 25 percent for manufacturers. It would also allow small businesses to write off $1 million in investments.
To pay for the infrastructure investments and other spending, Obama proposed that companies be able to repatriate foreign earnings back to the U.S., subject to a one-time “transition fee.”
Republicans have discussed similar ideas but have pushed to use revenue from that proposal to pay for lower tax rates.
The president offered his new proposal in a speech in Chattanooga, Tenn., at an Amazon.com warehouse, during which he pressed for Republicans to accept his ideas.
“If we’re going to break free of the same old arguments, where I propose an idea and Republicans say no just because it’s my idea, let me try offering something that serious people in both parties should be able to support — a deal that simplifies the tax code for our businesses and creates good jobs with good wages for the middle-class folks who work at those businesses,” he said.
Republicans reacted icily to Obama’s proposals, which they cast as a one-sided deal.
House Republicans noted that they’ve opposed corporate-only tax reform and called on Obama to lower the top rates for individuals.
Senate Minority Leader Mitch McConnell (R-Ky.) criticized what he said would be a tax hike on small business.
“The plan, which I just learned about last night, lacks meaningful bipartisan input, and the tax hike it includes is going to dampen any boost businesses might otherwise get to help our economy," he said. "In fact, it could actually hurt small businesses. And it represents an unmistakable signal that the president has backed away from his campaign-era promise to corporate America that tax reform would be revenue neutral to them.”
Because Senate Finance Committee Chairman Max Baucus (D-Mont.) has called for tax reform to be revenue neutral, McConnell characterized it as a rebuke to Baucus and questioned whether it would hurt the cause of tax reform.
“Not only is this a rebuke to one of his party’s most senior Senators — the Finance Committee Chairman — it also represents a serious blow to one of the best chances for true bipartisan action in Washington,” he said. "I truly hope the President reconsiders this plan and consults with Congress before moving any further."
Republicans, like House Ways and Means Committee Chairman Dave Camp (Mich.), have suggested similar ideas to Obama’s fee on multinationals but instead want to pour all of the gained revenue into lowering rates.
Camp's proposal for a one-time tax on offshore income was part of a plan to shift to an international tax system that shields most of the income that corporations keep abroad from U.S. taxation.
Obama’s plan also includes two executive actions.
The president has ordered the expansion of a network of manufacturing institutes based on what he says was a successful pilot plant in Ohio. He has advised a number of administration agencies to work with private companies to recruit foreign companies to relocate to the U.S.
“The point is, if Washington spent as much time and energy these past two years figuring out how to grow the economy and the middle class as it spent manufacturing crises in pursuit of a cut-at-all-costs approach to deficits, we’d be much better off,” Obama said in Chattanooga.
In a conference call with reporters, Jennifer Palmieri, White House communications director, said the administration hopes the plan will “spur Congress to consider something that actually creates jobs in the short term.”
Gene Sperling, the director of President Obama’s National Economic Council, said that Obama’s willingness to negotiate over the corporate tax rate was a new development because previously, he had tied that concession to an individual tax overhaul.
“Remember that we have previously only been willing to do corporate tax reform as part of a larger fiscal agreement that would include … a proposal to raise over half a trillion dollars from closing loopholes and [raising rates] on high income individuals,” he said in a conference call with reporters. “The president is now saying he’d be willing to do this separate from that area of contention between Republicans and Democrats.”
Boehner’s press secretary, Brendan Buck, complained that Obama did not reach out to congressional Republicans with his bargain offer but rather went straight to the press.
In a gaggle with reporters aboard Air Force One, White House spokesman Jay Carney said White House officials left a message for Boehner’s office on Monday night that was not returned.
Obama's new proposal comes as Washington braces for a pair of upcoming budget battles.
The federal government will shut down on Oct. 1 if Congress fails to pass a funding bill. But more than a dozen Republicans in the Senate have said they will block a continuing resolution to fund the government if it includes money for ObamaCare.
Congressional Republicans have vowed that they won’t sign off on a clean hike to the debt ceiling despite White House warnings that it won’t negotiate over the country’s credit.
In Chattanooga, Obama repeated some of the themes from his trio of economic speeches last week.
He called on Washington to reverse the trend in which the middle class is falling behind and to focus on the economy rather than “phony scandals” that have “shifted focus from what we need to do to shore up the middle class.”
This story was posted at 5:00 a.m. and was last updated at 2:19 p.m.