President Obama’s budget proposal may have a lot of new concessions to Republicans, but on taxes, his flag is firmly planted where it has always been: Make the tax code more progressive.
Already with ObamaCare and the fiscal cliff deal he has achieved the most progressive tax code since 1979, and this budget would make it even more so.
The new budget calls for another $600 billion in tax revenue over the next t0 years, almost solely from the wealthy.
The budget would install a 30% minimum tax on millionaires and close the hedge fund loophole, ending the ability for Wall Street executives to pay a lower tax rate than their secretaries. The budget would also cap the amount of tax deductions the wealthy could take, limit the ability of multimillionaires to use IRAs as massive tax shelters and raise the estate tax.
There’s been talk about President Obama’s concession on corporate tax reform by pledging it will be revenue-neutral: swapping loophole closures for lower overall tax rates. But this is not a concession, or at least, not a new one.
He has publicly embraced revenue-neutral corporate tax reform in his 2011 State of the Union address, his February 2012 “Framework for Business Tax Reform” and in the October 2012 debates with Mitt Romney.
The latest budget still has all the same loophole closures he’s pushing for years, most notably ending incentives to offshore jobs and scrapping tax breaks for fossil fuels.
Now, there is certainly an argument to be made that corporate tax reform shouldn’t be revenue-neutral. In response to the President’s 2012 proposal, Citizens for Tax Justice said, “The first goal of corporate tax reform should be to increase the overall amount of tax revenue collected from U.S. corporations, which today pay very low effective tax rates.” Currently American corporations pay the third lowest effective tax rate in the developed world. The case can be made corporations can handle a higher rate, and would have no incentive to flee to other countries.
But getting a higher corporate tax rate passed in the current Congress is almost certainly impossible. Any corporate tax reform will need some corporate support to clear the Republican House and avoid Senate filibuster, and the corporate community is severely divided over how to structure revenue-neutral tax reform, because even in revenue-neutral reform some individual corporations will pay more. Making them all pay more is likely a bridge too far for them. A more progressive Congress will need to be elected before that fight has a chance of success.
The fight for higher corporate taxes need not be permanently shelved, even if it is tabled in this budget. But we should not let that disagreement sideline all the other fights for a more progressive tax code that remain in the president’s budget.
