Politics

July 30, 2013

Obama challenges GOP to accept corporate tax deal

The president calls for lowering the corporate tax rate from 35 to 28 percent – and even lower for manufacturers – combined with investments in infrastructure, manufacturing and research to aid the middle class.

The Associated Press

CHATTANOOGA, Tenn. — President Barack Obama on Tuesday offered congressional Republicans a new corporate tax cut and jobs spending package he said might "help break through some of the political logjam in Washington," only to have GOP lawmakers immediately throw cold water on the idea.

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President Barack Obama speaks at the Amazon fulfillment center in Chattanooga, Tenn., Tuesday, July 30, 2013. Obama came to Chattanooga to give the first in a series of policy speeches on his proposals for private sector job growth and to strengthen the manufacturing sector. (AP Photo/Susan Walsh)

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Workers at an Amazon distribution center photograph President Barack Obama after he spoke to the group, Tuesday, July 30, 2013, in Chattanooga, Tenn. Obama spoke on his proposals for private sector job growth and ways to strengthen the manufacturing sector. (AP Photo/Mark Humphrey)

The announcement and quick rejection underscored how elusive common ground is between the Democratic White House and Republicans in Congress on fiscal issues. The divide was particularly stark on the corporate tax proposal given that both parties generally have supported overhauling the code for businesses, though the White House and Republicans have differed on specifics.

Obama outlined his proposal in a speech at a massive Amazon.com plant in Chattanooga, his latest stop on a summertime campaign to refocus his agenda on the economy. He said "serious people" in both parties should accept his offer.

"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."

But the office of House Speaker John Boehner, R-Ohio, complained that Obama's plan was simply a repackaging of proposals the White House has always supported.

"It's the opposite of a concession," said spokesman Brendan Buck, noting that Republicans want to link a corporate tax overhaul with changes in the individual tax code.

In another sign of their sour relationship, Boehner and the White House also dueled over the proposal's rollout, with the speaker's office saying officials there first learned about the plan from media reports. An Obama spokesman said the White House tried to tell Boehner's staff about the plan a day in advance but the call was not returned.

Like Republicans, the president previously has called for corporate tax reform to be coupled with an individual tax overhaul. But his new offer drops that demand 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.

The White House also said the president will continue to seek changes to the individual tax rate as part of a larger "grand bargain" he wants with the GOP. But with the prospects of such a deal growing increasingly slim, Obama advisers say they've opted to isolate an area on taxes where they believe they have more agreement with Republicans.

Obama also wants lawmakers to pour one-time revenue generated from the tax overhaul into jobs programs, including infrastructure, manufacturing and community colleges.

"If we're going to give businesses a better deal, we're going to give workers a better deal too," the president said.

Republicans have opposed using tax revenue to support more spending. Sen. John McCain, R-Ariz., said Tuesday that "everything should be negotiated, but certainly I'm not in support of it."

Administration officials said the jobs programs would be paid for with a one-time revenue boost from measures such as changing depreciation rules or having a one-time fee on earnings held overseas. But they wouldn't put a price tag on the revenue total or the corporate tax overhaul at large.

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.

John Engler, president of the Business Roundtable, welcomed Obama's call for lowering the corporate tax rate. But like many Republican lawmakers, he called for addressing individual tax rates at the same time and said he opposed using corporate tax overhaul revenue for "unrelated spending."

"Corporate tax reform should be part of a comprehensive fix for the individual and business tax codes, and corporate reform should be achieved in a revenue-neutral manner," said Engler, who heads the association of business leaders.

The backdrop for Obama's remarks Tuesday was an Amazon fulfillment center, a massive, 1 million-square-foot warehouse. During a tour of the facility, Obama was shown how the company gets packages ready for delivery, from the employees who pull orders from three stories of floor-to-ceiling shelves, to loading into boxes sealed with water-activated tape and quality control

Amazon 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.

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