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Obama Proposes Tax Cut for Corporations in Response To Taxation and Income Inequality

By Frank Byronn Glenn President Obama’s proposal to lower the corporate income tax rate is fraught with peril.  It may even be disingenuous.

The marginal tax rate today is 35%.  When John F. Kennedy was sworn in as President in 1960, the marginal tax rate was 91%.  He proposed that because of the excessive tax breaks and loop-holes enjoyed by corporations and wealthy individuals we could lower the official marginal tax rate to, say, 72%, eliminate the loop-holes and come out the  same or  perhaps with even more revenue.  Cut the tax rate, he said, and broaden the base.

That’s what Obama is saying.

It is true that the idea could work – in a vacuum.  The reality is that once you lower the marginal tax rate and change or eliminate a few loop-holes, the inexorable process of lobbyists pressing for new loop-holes and tax breaks – or restoration of the old ones – begins in earnest.

That same mantra has been used by the spend and cut Republicans since the 1960’s.  It never works. The end result is just lower tax rates and the same or more tax breaks and loop-holes for rich people, because Congress, when the curtain is drawn back, basically represent the interests of their largest campaign contributors.

There may be a carrot and a stick silver lining, however, and that’s what I am hoping.  If, as the pre-release press suggests, the incentives to out-source jobs to an incentive to bring jobs back to the United States, then this deal with the devil still may benefit American workers to some degree — over time.