"Fiscal Cliff" Talks Turn Sour
Yesterday, the sides were so far apart on critical issues that I wondered how a deal could be made in two days. The market saw it otherwise, mainly on hype Obama Offers Concessions Regarding Tax on Wealthy.
Today is a different story as "Fiscal cliff" talks turn sour, Obama threatens veto.
Tax reform is one of the few things in Washington these days on which Republicans and Democrats both agree is worth doing. Especially at this time of year, when taxpayers are struggling to file their tax returns, it’s not hard to get applause for promises to make the tax system fairer and simpler. Converting this widespread bipartisan desire into legislation, however, is another matter.
President Barack Obama's administration on Wednesday unveiled plans to lower the top corporate tax rate to 28 percent and choke off lucrative loopholes, an election-year gambit testing Republicans' pro-business credo.Doubling down on his pledge to build an economy based on "fairness," Obama's lieutenants rolled out a plan that would lower the nominal business tax rate from 35 percent, but rake in more revenue by ending dozens of tax breaks and subsidies.
Recent financial data from the OECD countries showed that the implemented austerity measures and higher corporate taxes has actually harmed countries, decreasing the amount of fresh foreign investments, reported Financial Times.
Is it an election year already? It must be, because President Obama is once again trotting out his campaign-approved, focus-group-tested "plan" to punish mean ol' American companies who engage in "outsourcing." Bloomberg gives us the utterly unsurprising news:
AP - A preliminary report by Congress' revenue scorekeeper suggests that it would be hard for Republicans to attain their goal of lowering the top corporate tax rate to 25 percent if they want to pay for it solely by eliminating business tax breaks.
David Hunkar submits: The U.S. has one of the highest corporate tax rates in the world. Only Brazil, Uzbekistan, Chad and Argentina have higher corporate tax rates than the U.S. According to a research study by the Cato Institute, the effective U.S. corporate tax on new investment was 34.6% in 2010. This was higher than the average OECD rate of 18.6% and the average rate for 83 countries at 17.7% as shown in the chart below: (Click to enlarge)
David Leonhardt has a piece explaining the horrors of the American corporate income tax code, which manages to have both higher rates than almost any other developed country and also raises less revenue. Why? So many loopholes. Doing it that way, meanwhile, harms economic growth: