By doing absolutely nothing President Obama had managed to make the United States a world wide leader in at least one category: high corporate tax rates.
As of midnight Sunday, when Japan lowered their corporate tax rate from 39.5 percent to 36.8 percent, the United States now has the highest corporate tax rate in the industrialized world at 39 percent. While this milestone did happen on Obama’s watch, he cannot take full credit for the accomplishment. Learning from the success of President Reagan’s tax cuts in the 80s, the rest of the world has been slashing their corporate tax rates for decades. As recently as 1990, the average corporate tax rate among the world’s largest economies was above 45 percent.
But while other countries have been making themselves more competitive places to do business, the United States has been treading water. Today, the average corporate tax rate in the industrialized world is 26 percent. That is a full 13 points lower than in the United States.
Of course, very few businesses pay the full 39 percent rate. Most corporations pay accountants and lobbyists in Washington millions of dollars a year to game the system so they pay a much lower effective rate. As Obama’s own Treasury Department has noted, however, this is terrible for the economy: “Currently, tax expenditures in the tax code vary dramatically by industry. … The result is a tax system that distorts investment decisions. By allocating capital inefficiently, this system lowers living standards now and could impede technological innovation.”
Unfortunately, Obama’s tax plan only makes this problem worse. The plan does remove some loopholes, but mostly just on industries Obama hates anyway (like the oil and gas industry, jet manufacturers and insurance companies). But for every loophole Obama closes, he creates another. Manufacturers, clean energy firms and firms that do not do business overseas all get new benefits under Obama’s plan.
If you want to maximize the power of Washington to pick winners and losers through the tax code, then the higher the nominal corporate tax rate, the better. As long as Obama is president don’t expect any real tax reform anytime soon.
National Poll: President Obama has opened up a 51 percent to 42 percent among registered voters in a USA Today/Gallup Poll of a dozen swing states, including Colorado, Florida, Iowa, Michigan, Nevada, New Hampshire, New Mexico, North Carolina, Ohio, Pennsylvania, Virginia and Wisconsin. Obama’s lead is built on a 2-to-1 advantage among women under 50. Among all registered voters nationwide, Gallup has Obama up 49 percent to 45 percent.
Around the Bigs
The Hill, House Dems eye policy responses to shooting death of Trayvon Martin: Democrats want to capitalize on the Trayvon Martin shooting by pushing tougher rules for neighborhood watch programs, eliminating certain state gun laws, banning racial profiling and requiring an examination of racial disparities nationwide.
The New York Times, U.S. Joins Effort to Equip and Pay Rebels in Syria: The United States and dozens of other countries pledged $100 million to pay rebels organize and evade Syria’s military.
The Wall Street Journal, EU Lenders Kick Troubles Down Road: Even as the European banking crisis shows signs of easing, lenders across the Continent are engaging in a variety of maneuvers to avoid, or at least delay, coming to terms with potential problems lurking on their books.
The New York Times, Ranks of Working Poor Grow in Europe: Across the European Union. hundreds of thousands of people are living in campgrounds, vehicles and cheap hotel rooms as a growing slice of the population is slipping through Europe’s long-vaunted social safety net.
The Los Angeles Times, Officials ponder how to ensure health care reform in California: If the Supreme Court overturns Obamacare, California Democrats are ready to revive the individual mandate in the Golden State.
AEI’s James Pethokoukis posts a lengthy one-on-one Q&A with Romney.
Reporting from a campaign event in Wisconsin, Ann Althouse suggests Romney pick Paul Ryan as his running mate.
The Weekly Standard‘s Stephen Hayes worries that Team Romney may choose a moderate instead.
Obama’s Super PAC, Priorities USA, is running an ad in Colorado, Florida, Iowa, Michigan, New Mexico, Nevada, Ohio and Virginia attacking Romney for being supported by oil companies.
Talking Points Memo‘s Nick Martin has compiled a time-line of the Trayvon Martin shooting.
Bob Shrum makes the case that an Obamacare loss in the Supreme Court will “guarantee” an Obama second term.