Obama Offers to Cut Corporate Tax Rate to 28%

Nomi Prins crunched the numbers in an article over at the Daily Beast and makes the point that the loopholes being offered up do not compensate for the revenue being surrendered with the rate cut. In other words, the proposed corporate tax reform isn't "revenue neutral," rather, it's "revenue negative."

How often do we have to notice the happy synergy between Obama receiving more money from Wall Street in 2008, than any candidate in history, and his cabinet loaded with Wall Street insiders?

This proposed "reform" is a corporate tax cut.

How could anyone argue with simplifying the tax rate and lowering it?

Let me give that a shot...

Usually, "simplifying the tax code and lowering it" is a conservative agenda item rather than a liberal agenda item. The reason for this is that lower tax rates usually involve lower tax revenues and the shortfall has to come out of the hides of the poor, working and middle classes. This is not the first time that Obama has suggested tax reform along the lines of "lowering the rates and broadening the base," but when you get down to it, isn't that what Steve Forbes ran for president on.

I'll wait to flesh out my opinion on this until I read what guys like Krugman and Stiglitz have to say about it, but my initial reaction is continued disappointment along the lines of not seeing the Democrats winning the White House in 2008 result in trying Democratic ideas for the next four years.

We probably could have gotten Obamacare out of Nixon.

Where liberals/progressives/socialists should be a little wary of this process is in how it deals with one of their favorite corporate tax subsidies: employer provided health care insurance. Remember the "Cadillac health insurance plan tax" that started to get bandied about during the buildup to the passage of Obamacare? I expect that will work its way back into the tax reform debate.

Here's how it could wind up really sucking: If the tax deductible status for employer provided health insurance is revoked, they will know doubt be seeking that tax burden onto employees as taxable income. I'm not trying to be a fear monger here, but people need to be vigilant.

I doubt Obama's corporate tax reform proposal, as introduced by the White House, has a Cadillac health plan tax, but I would be shocked if Republicans didn't put it on the table. And it is worth remembering that the White House became receptive to such a tax as the negotiations for Obamacare wore on.

It does? Has anyone proven this?

Yes, actually.

There was this clown during the Reagan administration who came up with this theory called the Laffer curve (I think his name was Laffer) and it put forth the idea that lowering taxes increased tax revenues because the resulting growth more than compensated for the lowered rates. It's been disproved and discredited.

Popular idea, though. It polls well among taxpayers.

I was hoping someone could point me to the info because I have been unable to find it.

There's a good book for a popular audience (which is of course where I fit into things) called Economics for the Rest of Us: Debunking the Science That Makes Life Dismal by Moshe Adler, who is a professor at Columbia. He takes on a lot of things that we take for granted when we talk about the economy. He starts out talking about the very definition of "economic efficiency" explaining how that has changed over time. He also takes on The Laffer curve and spends some time on taxes and revenues. I'll bet you will find a decent answer in that book.

As far as books for a popular audience go, it has a few demanding passages that my drive you to grab a pencil and paper.

Good luck with the exams!

I seem to remember that the debunking of the Laffer curve had to do with how it is scaled. In order for decreasing the tax rate to result in higher revenues, the taxes have to be really really high to begin with. If taxes were 100% there would be nobody doing any business anywhere and revenues would be zero. But once you get down to the tax rates we were dealing with under Reagan and Bush, lowering the tax rates lowered revenues.

He augments the technical discussion with some smoking-gun quotes that show even the Reagan administration didn't believe it, they just wanted to pursue it.

Tax cuts for the wealthy don't seem to be an efficient way to stimulate the economy. They seem t be an efficient way to increase the wealth of the wealthy.

Some people find the notion of government redistributing wealth to be immoral. (One could make a moral argument either way, I think.) But I think that from a systems perspective, if you want the economy to be a stable and durable system, you need to redirect some of the wealth from where it is accumulating to where it isn't accumulating. What we see now is accelerating inequality, and most of the wealth under the present regime is accruing to Wall Street. (There are people seriously asking whether Wall Street does anything of value or merely exploits its position in the economy to siphon off wealth.)

Call it self interested reasoning, but I am receptive to tax-the-rich arguments. Of course that depends on what we are going to do with that money. If we are just going to tax the rich in order to start wars we don't need, don't blame THAT on me.

Krugman had a compelling graph showing that Bush's tax cuts had reduced revenues, but if you compare that graph to a graph of the market it looked almost like a trend line that fit the market graph very well.

I think it is the government spending that encourages growth. The middle class we saw after WWII that everyone keeps saying we need to save and everyone refers to as the cornerstone of our economy was the result of an awful lot of investment in infrastructure, education and subsidies.

And that spending comes from two sources: taxes and debt.

Alternatively, I can't help but believe that the overwhelming majority of the wealthy have achieved their wealth by using their capital at it's utmost efficiency

Ideally, capitalism is a meritocracy. The problem we are having now is that wealth can be used to bribe government into creating more personal wealth. Again, from a systems perspective, that is an example of positive feedback. Positive feedback leads to exponential growth, and ultimately, to things ending badly. Negative feedback is what keeps systems stable.

Not that I am an expert on systems either, but I recently read Thinking in Systems: A Primer by Donella Meadows. She's passed away now, but she was working out of MIT's system simulations laboratory for a few decades. It was a bit of an eye-opening book.

Smart policies take into account the complexities of the underlying systems. The hard part is getting the analysis of the systems right.

For example, right now we are having a national debate about education. Some people want to dismantle public education. Some people think we need to pay rock-star teachers like they were lawyers. Some other people think that the problems really lie elsewhere, like in the children's homes. It's hard for a kid to function in school if he slept in a homeless shelter the night before and has skipped two meals.

I guess that is the difference between a liberal and a reformer. A liberal throws money at an existing system hoping that merely doing that will give the system the chance to fix itself. A reformer tries to get in there and tinker under the hood to fix the system.

I learned through phonics also.

From what I recall, phonics has a higher success rate but it can lead to slower readers. The faster readers don't pronounce the words to themselves.

The real reason "Johnny Couldn't Read" was probably that the TV was always on.

My point is that while tinkering may be the answer, or at least part of the answer, when it comes to education, tinkering in the name of tinkering can be detrimental.

Teaching has evolved over a long period of time, there just has to be a lot of collective wisdom in what has evolved over that time. Abrupt paradigm shifts usually make me nervous that it's what they don't know which is going to carry the day.

Do you know of any ways to break that habit?

I never thought to look into it. I just hoped that my reading would improve with practice. I can't say that it has.

Sounds like a job for Google.

Wikipedia has an article on phonics and another one on whole language.

I think there is an opportunity for someone to write a self-help book called "Rising from the Phonics Ashes."

I can't really tell from the phonics article if they blame it for slow reading.

Yes, it is interesting.

Check out the wikipedia articles on sub-vocalization and speed reading.

Do you wear reading glasses? I've often suspected that I could have used reading glasses when I was younger. I've got them now. That's for sure.

I think my reading speed has started to improve since I started using the Kindle for recreational reading. You can set the font size to something comfortable and I find a larger font size facilitates what they seem to be referring to as "chunking."