Democrats finally surrender to corporate tax cuts for America

Democrats finally surrender to corporate tax cuts for America
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After months of deriding the corporate rate cuts of the Tax Cuts and Jobs Act (TCJA) as a corporate giveaway, Democrats have a new tax reform proposal that represents a complete reversal of course from their previous position. Far from the “armageddon” or “bankruptcy” that Democrats said a corporate tax cut would represent, their own proposal acknowledges what everyone now agrees on: Cutting the corporate rate is necessary for the American economy.

The plan by Senate Democrats acknowledges that our corporate tax rate needed to drop at least 10 percentage points from its previous level of 35 percent. Supporters of the corporate tax cut argued that our corporate tax rate, far higher than that of other industrialized nations, was harming our international competitiveness.

The issue Democrats apparently had with the TCJA’s corporate rate cut was not that it was a giveaway to corporate interests. Their argument was apparently that a 14 percent rate cut is unconscionable, but a 10 percent rate cut is necessary. Who knew that 4 percentage points were the difference between sensible policy intended to keep the nation competitive and selling out to corporations?

The anti-tax reform community’s messaging against the new corporate tax changes have become confusing. Though Democrats claim that the law’s corporate tax cut has resulted in CEO bonuses and stock buybacks, they still apparently wanted more than 70 percent of the cut to the corporate income tax that ended up being enacted under the TCJA. Despite Democratic condemnation of CEO bonuses and stock buybacks, they have essentially gone on record supporting 70 percent of them.

Taxpayers should understand that criticism of the corporate rate cuts has been disingenuous. The corporate rate needed a substantial cut to allow the country to remain internationally competitive. It has been an area of bipartisan agreement for some time now. Even President Obama proposed cutting the corporate rate to 28 percent. The rest of the industrialized world has been cutting corporate tax rates over time, and the United States had fallen behind. Action was needed to catch up.

Certainly, a 4 percent hike in the corporate tax rate would not be insignificant. As predicted, millions of Americans have already benefited from bonuses, wage increases and increased 401(k) contributions. Yet, the real benefits from the corporate rate cut will come over time, as wages rise in concert with productivity boosts arising from increased corporate investment. Cutting into these future gains by raising the corporate tax rate will only harm American workers just when they finally stand to see real wage increases.

With their counterproposal to the TCJA, Senate Democrats have managed to confirm many of the arguments made in favor of a significant rate cut. While it is good to see that Democrats do not aim to hike the corporate tax rate back to an its stratospheric former height, it is still disappointing that Democrats reflexively attacked a policy change they mostly agreed with. Just because it is business as usual in Washington does not make it right to intentionally deceive taxpayers to advance your agenda.

Andrew Wilford is an associate policy analyst with the National Taxpayers Union Foundation. You can follow him on Twitter @PolicyWilford.