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During his State of the Union Address last week, President Obama called on Congress to “get rid of the loopholes” in the corporate tax and “use the savings to lower the corporate tax rate for the first time in 25 years — without adding to our deficit.”
If the President means that all of the revenue raised by closing tax loopholes should be used to pay for a reduction in the corporate tax rate, then this is the wrong approach.
A report released earlier that day by Citizens for Tax Justice explains several reasons why corporate tax reform should be revenue-positive, not revenue-neutral. Despite what corporate CEO’s and many politicians claim, U.S. corporate taxes are already lower than the corporate taxes imposed by the countries that we compete with. Surveys show that most Americans want large corporations to pay more, not less, in taxes. The arguments lobbyists make to try to justify reducing U.S. corporate taxes — arguments related to “competitiveness” and alleged “double-taxation” of corporate income — don’t add up. The last major corporate tax reform, which was enacted under President Ronald Reagan at a time when corporate loopholes were out of control, as they are again today, resulted in a 34 percent net corporate tax increase.
House Budget Chairman Paul Ryan gave the Republican response to President Obama’s State of the Union address, speaking at length about what he sees as the need for greater cuts in government spending.
Anyone interested in learning what sorts of changes Congressman Ryan has in mind can look to the detailed “Roadmap for America’s Future” that he proposed last year.
Ryan’s “Roadmap” would reduce Social Security benefits and partially privatize the program, replace Medicare and Medicaid with gradually declining subsidies for private health insurance, and dramatically slash other types of non-military spending.
CTJ’s report on the tax proposals in Ryan’s “Roadmap” found that they would raise taxes on average for the bottom 90 percent of taxpayers, slash taxes on average for the richest 10 percent of taxpayers, and lose $2 trillion over a decade.