Obama's corporate tax plan doesn't win over GOP
President Barack Obama traveled to Tennessee on Tuesday to trumpet a new tax deal to try to break Washington's gridlock, but South Carolina's Republicans heard little they liked.
Obama visited a large Amazon.com plant in Chattanooga to discuss his proposal to cut corporate income tax rates.
That's a step he had hesitated to do without other tax reform, but Obama said he would consider it in exchange for more government spending on job creation programs, such as manufacturing, infrastructure and community colleges.
U.S. Rep. Mark Sanford, R-S.C., said he was encouraged that Obama's proposal recognizes that the nation's corporate tax rate isn't competitive with what other countries charge.
“But I don't agree with his remedy,” Sanford said.
Sanford said Obama's plan not only favors larger corporations over smaller businesses but also would increase spending to stimulate the economy, an idea he fought against as governor.
Sanford said Obama's plan marks the opening salvo in a larger debate that's coming regarding federal taxes. “I think this is more about positioning in that debate than it is legislative movement,” he said.
U.S. Sen. Tim Scott said there's no question that the nation's tax system should become fairer and flatter so businesses can put folks back to work.
But Scott, R-S.C., said tax reform should involve lower rates for families, not just businesses.
“Unfortunately, the president's most recent proposal is a familiar one — higher taxes that make it harder for our economy to meet its potential,” he said. “Once again, the president wants the government to pick winners and losers instead of getting out of the way and allowing our entrepreneurs and job creators to take risks, make investments, and grow.”
U.S. Rep. Jim Clyburn, D-S.C., came to Obama's side.
“The president is showing real leadership on getting this economy moving in a fair and balanced way,” Clyburn said. “It is time for the Republicans to step up to the plate rather than constantly obstructing all of his efforts.”
Clyburn said addressing the nation's economy and helping the middle class is going to require bipartisan cooperation, adding, “Let's get to work.”
The offer was immediately panned by other GOP lawmakers, who accused the president of repacking proposals he already supports and making no concessions to the opposing party.
Obama said “serious people” in both parties should accept his deal.
“I'm willing to work with Republicans on reforming our corporate tax code, as long as we use the money from transitioning to a simpler tax system for a significant investment in creating middle-class jobs,” Obama said. “That's the deal.”
Administration officials cast the corporate tax proposal as the first new economic idea the president plans to offer in the coming months. With budget deadlines looming this fall, the White House is seeking to refocus Obama's agenda on the economy in order to rally public support for his ideas and increase his leverage over the GOP.
Obama and Republicans have long supported changes to the corporate tax code, but they differ over key details, including the exact rate and what should be done with any revenue generated by the changes.
Georgia Republican Sen. Johnny Isakson, one of a handful of GOP senators meeting regularly with the White House on budget issues, also lambasted the administration Tuesday for seeking to split corporate tax reform from individual rates.
“You can't do that,” Isakson said. “That'll never fly.”
Republican Sen. John McCain of Arizona, who has also been talking regularly with the White House, said, “Everything should be negotiated, but certainly I'm not in support of it.”
The disagreement was even deeper from House Republican leadership, with Speaker John Boehner's office accusing the White House of blindsiding lawmakers with the proposal. The White House said later that senior officials had tried to brief Boehner's staff about the offer on Monday, but their phone calls were not returned until the next morning, after the proposal was detailed in media reports.
Like Republicans, the president has previously called for tax reform to be coupled with an individual tax overhaul. His new offer drops that proposal and calls only for lowering the corporate rate from 35 percent to 28 percent, with an even lower effective tax rate of 25 percent for manufacturers.
In exchange, Obama wants lawmakers to pour the revenue generated from the tax changes into job-creation programs, such as manufacturing, infrastructure or community colleges.
“If we're going to give businesses a better deal, we're going to give workers a better deal too,” Obama said.
Administration officials wouldn't put a price tag on the proposal or say how much money should be spent on the jobs programs.
Officials said money to pay for the job-creation programs would come from a one-time revenue boost from measures such as changing depreciation rules or having a one-time fee on earnings held overseas.
The White House also said the president will continue to seek changes to the individual tax rate as part of a larger “grand bargain” with the GOP. But with the prospects of such a deal growing increasingly slim, Obama advisers say they have opted to isolate an area of tax reform where they believe they have more agreement with Republicans.
When Obama first unveiled his corporate tax plan last year, congressional Republicans called for even deeper cuts for the business world. His campaign rival, Mitt Romney, wanted a 25 percent corporate tax rate.
The U.S. has one of the highest corporate tax rates in the world, but many businesses avoid the full cost by taking advantage of deductions, credits and exemptions that Obama wants to eliminate.
Obama wants to do away with corporate tax benefits like oil and natural gas industry subsidies, special breaks for the purchase of private jets and certain corporate tax shelters. He also wants to impose a minimum tax on foreign earnings, a move opposed by multinational corporations and perhaps the most contentious provision in the president's plan.
The backdrop for Obama's remarks Tuesday was an Amazon fulfillment center in Chattanooga, one of more than a dozen warehouses operated by the world's largest online retailer.
The company announced Monday that it would add 7,000 new jobs, including 5,000 more at U.S. distribution centers that currently employ about 20,000 workers who pack and ship customer orders. Amazon.com has been spending heavily on order fulfillment to help its business grow.
The plant was the source of tax controversy when it opened; Amazon originally was granted an indefinite waiver on collecting sales tax in a deal to bring two distribution centers to Tennessee. The state's retailers were outraged that they were put at a competitive disadvantage, and Amazon has agreed to start collecting Tennessee sales tax next year.
The White House said Obama wasn't visiting Amazon because of the company's position on taxes, but because it's an example of a successful American business growing and creating more jobs.
The Associated Press contributed to this report. Reach Robert Behre at 937-5771.