How Will Obama Pay for His New Tax Breaks for Businesses?
The Obama administration is this week proposing a series of expensive tax breaks for businesses as part of a larger effort to create new jobs: $100 billion to make permanent a research and development tax credit and $200 billion to let companies to deduct the full cost of the capital investment next year.
Obama said that he and Congressional leaders will find a way to make the measures deficit-neutral. But where will the $300 billion come from? In The Washington Post, Anne Kornblut and Lori Montgomery write: “It would be paid for by closing other corporate tax loopholes, said the official, speaking on condition of anonymity because the policy has not yet been unveiled.”
But closing loopholes on big, multinational corporations will pose a number of problems. First of all, finding $300 billion in tax increases itself will pose a challenge — many of the easy fixes are already gone, used to fund other priorities. Then, even if Democrats find a way to make the bill deficit-neutral, groups like the Chamber of Commerce might decide to object to it, and might lobby against it, since it raises taxes on big businesses. So too might moderate Senate Republicans, who have objected to the small-business bill largely on the grounds that it raises taxes for a small number of companies. Moreover, Republicans will likely oppose the proposal for just shifting the tax burden around — I can imagine Republicans arguing that the bill does nothing other than pick winners and losers.
Indeed, Republicans have already opposed Obama’s proposal. Senate Minority Leader Mitch McConnell (Ky.), for one, released this statement: “After the administration pledged that a trillion dollars in borrowed stimulus money would create 4 million jobs and keep the unemployment rate under 8 percent, their latest plan for another stimulus should be met with justifiable skepticism. After failing to deliver on their economic promises for more than 18 months, the administration wants to do it again — this time with higher taxes for even more new spending.
“Americans are rightly skeptical about Washington Democrats asking for more of their money — and their patience; after all, they’re still looking for the ‘shovel-ready’ jobs they were promised more than a year ago. A last-minute, cobbled-together stimulus bill with more than $50 billion in new tax hikes will not reverse the complete lack of confidence Americans have in Washington Democrats’ ability to help this economy.”