President Obama reportedly will propose two big corporate tax cuts this week.
One would expand and make permanent the research and experimentation tax credit, at a cost of about $100 billion over the next ten years. The other would allow companies to write off 100 percent of their new investments in plant and equipment between now and the end of 2011 at a cost next year of substantially more than $100 billion (but a ten-year cost of about $30 billion since those write-offs wouldn't be taken over the longer-term).
The economy needs two whopping corporate tax cuts right now as much as someone with a serious heart condition needs Botox.
The reason businesses aren't investing in new plant and equipment has nothing to do with the cost of capital. It's because they don't need the additional capacity. There isn't enough demand for their goods and services to justify it. Consumers aren't buying because they're trying to come out from under a huge debt load, including mortgage debt; they have to start saving because their nest eggs are worth substantially less; and they've lost or are worried about losing jobs and pay.
In any event, small businesses don't have enough profits against which to use these tax credits and deductions, and large corporations are sitting on over a trillion dollars of profits and don't need them.
Republicans and corporate lobbyists have been demanding tax cuts on corporate investments for one reason: Big corporations are investing in automated equipment, robotics, numerically-controlled machine tools, and software. These investments are designed to boost profits by permanently replacing workers and cutting payrolls. The tax breaks Obama is proposing would make such investments all the more profitable.
In sum, Obama's proposed corporate tax cuts (1) won't generate more jobs because they don't put any cash in worker's pockets (as would, for example, exempting the first $20,000 of income from the payroll tax and making up the difference by applying the payroll tax to incomes over $250,000); (2) will subsidize companies to cut even more jobs; and (3) will cost $130 billion -- money that could better be spent helping states and locales avoid laying off thousands of teachers, fire fighters, and police.
So why is Obama proposing them? To put Republicans in a bind. If they refuse to go along he can justifiably say they have no agenda other than obstruction. After all, the only thing they've been arguing for is lower taxes. On the other hand, if Republicans agree to support these corporate tax cuts, Obama can claim a legislative victory that will help Democrats neutralize their opponents in the upcoming elections.
The proposals also make it harder for Republicans to argue the Bush income tax cuts should be extended for the richest 3 percent of taxpayers because small businesses need it. Obama's corporate tax cuts would appear to do the trick.
The White House probably figures even if Republicans agree to the proposed tax cuts, nothing will come of it. Congress will be in session for only about two weeks between now and the midterm elections so it's doubtful these proposals would be enacted in any event.
But this cynical exercise could backfire if Republicans call Obama's bluff and demand the corporate tax cuts be put on a fast track and get signed into legislation before the midterms.
More troubling, Obama's whopping proposed corporate tax cuts help legitimize the supply-side dogma that the economy's biggest obstacle to growth is the cost of capital, rather than the plight of ordinary working people.
This post originally appeared at RobertReich.org.
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Not Liberals.
Not populist economics,
not FDR,
but Hoover.
It's well worth a listen:
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Part 1 is guest host Cent Uygur's set-up for the Reich interview: http://www
While Obama gives much lip service to being "president to all the people", he doesn't govern. Everything since he got into the White House has been about the next election. There isn't anything that Obama does that ISN'T a political ploy, and it's not for the good of the People, only the corporatio
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2005 - Bush signs 286 billion 6 year tax bill
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2010 Obama Administra
http://the
So 12 years and 3 Presidents later after spending 503 Billion dollars on transporta
and planning on spending an additional 500 billion, where are the jobs? Where are all these wonderful mass transits upgrades? Where is the high speed rail?
Stop the madness and stop the spending! It is not working!
Unemployme
What were politician
There is another set of facts: The record that was set in 1929 for the biggest stock market decline in one day was broken in 1987. But Ronald Reagan did nothing-- and the media clobbered him for it.
Then the economy rebounded and there were 20 years of sustained economic growth with low inflation and low unemployme
Feel free to quote me. I got to go to work. Have a good day, everyone.
Tell me how giving them more money is gong to make more people come through their doors willing to pay for what they sell?
The issue is not enough paying customers, the issue in ALL recessions
One European nation has been posting astonishin
And its unemployme
That country, of course, is Germany, which has bounced back strongly from the global recession and financial market meltdown.
Although problems with its banking system linger -- as does the threat of another round of the euro zone's crisis -- Germany's prowess as an export-ori
Corporatio
In answer to your question, reduced corporate taxes reduce the cost of goods and services, which gives consumers more disposable income which will stimulate consumer spending and the economy.
If that is the criteria, companies have not been following your rules.
And even if they do lower the prices for their goods and services, which I think is a pipe dream, if the consumer has no money to buy them to begin with, there is not point to the exercise.
He could call together his party and demand they unite under a common, progressiv
Whether he is weak because he lacks the courage and moral clarity to stand up to corporate power and the conservati
The same issue applies Senate Majority Leader Harry Reid. Keep in mind, the Senate Democrats CHOSE him knowing he would be weak because they didn't want to be arm twisted into supporting anything that would reduce their corporate campaign cash donations by one dime.
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There is always uncertaint
Business will hire when there is a demand and when they can't push their employees. Right now there is high unemployme
It's really quite simple: THERE'S NO DEMAND! Businesses are not going to start spending until demand increases.