WASHINGTON -- A powerful coalition of corporate executives on Wednesday praised a deficit reduction plan that has long been maligned by GOP leaders for raising taxes.
The Business Roundtable, a lobbying group of CEOs at companies from American Express to Xerox, released its own plan aimed at revitalizing the American economy. The report also commends the plan issued by the bipartisan Simpson-Bowles deficit reduction panel and a more tax-hike-focused plan developed by former Federal Reserve Vice Chairman Alice Rivlin and former Sen. Pete Domenici (R-N.M.).
The Simpson-Bowles and Rivlin-Domenici plans "represent thoughtful, nonpartisan approaches that include significant policy solutions for America's leaders to consider and take action upon," the Business Roundtable report states.
When it was first released in December 2010, the Simpson-Bowles plan was greeted with disdain from progressive economists, who viewed the proposed $3 in spending cuts for every $1 in tax increases as too hard on the poor and too easy on the rich. As more conservative budget plans emerged, however -- including a proposal from Rep. Paul Ryan (R-Wis.), chairman of the House Budget Committee Chairman, to eliminate Medicare -- progressives have come to view the Simpson-Bowles proposal with more favor.
The Simpson-Bowles commission was created by President Barack Obama and stacked with both Republicans and Democrats. One of the panelists was Ryan himself, who voted against the final plan because it sought deficit reduction by building upon Obama's health care reform legislation and raising taxes.
"Relative to a current policy baseline, the proposal would increase revenues by $2 trillion over 10 years," Ryan wrote in December 2010. "Increasing the government's take from the economy hinders growth, and it is doubtful these revenues would be used for deficit reduction: there is no guarantee that reductions in Federal spending would be achieved."
But now the very CEOs whom Ryan has repeatedly lionized as job creators are praising Simpson-Bowles, as well as Rivlin-Domenici, which actually proposes more in tax increases than Simpson-Bowles. The Rivlin-Domenici plan features roughly $1 in tax increases for every $1 in spending cuts, according to the Center on Budget and Policy Priorities.
"Awesome," said Chuck Marr, director of federal tax policy for the Center on Budget and Policy Priorities, a liberal think tank. "They're signing on to an increase of $2 trillion above current policy baseline. And it's $1 trillion above a plausible baseline assuming Bush tax cuts for the top go away."
Exactly where those tax increases would come from under Simpson-Bowles was vague. The bipartisan commission established only broad principles for tax reform, rather than laying out specific tax policies. But under a hypothetical model that the commission presented in its report, many of the tax code's perks for wealthy individuals would be eliminated. The proposal would end the lower-tax treatment for income from stock dividends and capital gains, which are taxed at a rate of 15 percent instead of rates that can reach 35 percent for ordinary income.
Approximately 50 percent of all capital gains are received by the top 0.1 percent of earners, according to the Washington Post. The capital gains tax break helped Republican presidential contender Mitt Romney to an overall tax rate below 14 percent on $21 million in income last year.
Simpson-Bowles also proposed limiting the interest deduction on smaller mortgages and eliminating it entirely for mortgages of $500,000 or more.
The Business Roundtable's praise aside, Simpson-Bowles still has plenty of detractors. Social Security advocates have repeatedly pointed to statements from former Sen. Alan Simpson (R-Wyo.) that evidenced a fundamental misunderstanding of the basic workings of Social Security. Simpson-Bowles calls for significant Social Security cuts based on those flawed views. And economist Dean Baker, co-director of the Center on Economic and Policy Research, has argued that the plan does not demand enough from large corporations, noting that co-chair Erskine Bowles is a director for Morgan Stanley.
Nor is the Business Roundtable report a liberal's dream. It suggests a host of corporate tax giveaways anathema to progressive tax experts. It explicitly asks Congress to reduce the maximum corporate tax rate to 25 percent, without specifying any offsets from closing loopholes or ending other tax breaks. Lowering the corporate rate without closing loopholes would conflict with the Simpson-Bowles scheme.
The Business Roundtable report also urges Congress to shift to a "territorial" tax system, which would reward companies for exploiting offshore tax havens. Under the existing system, companies that stash profits in the Cayman Islands, for instance, do not pay U.S. taxes on them until the money is brought to the United States. Under a territorial system, companies never have to pay taxes on those profits, whether they bring them back to the U.S. or not.
How will Trump’s administration impact you? Learn more