Explaining Southern California's economy

Obama corporate tax cut: The fight over 3 percent

Obama Visits Master Lock Company, Discusses Economic Plan In Milwaukee

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MILWAUKEE, WI - FEBRUARY 15: U.S. President Barack Obama speaks to workers at the Master Lock factory on February 15, 2012 in Milwaukee, Wisconsin. Obama applauded the company, which he cited in his State of the Union address, for bringing back 100 jobs to the U.S. from China. (Photo by Scott Olson/Getty Images)

The Obama administration has come out with a proposed cut to corporate taxes, from the current 35 percent to 28. The White House says the cut would be "revenue neutral," meaning that whatever revenue is lost in that 7 percent solution would be made up by eliminating tax breaks and loopholes. 

Republicans are allowed to like this — but not too much. Their pool of candidates all want to cut corporate taxes as well, but by larger margins than Obama. Mitt Romney wants 25 percent, while Gingrich, Santorum, and Ron Paul all want to go lower. Paul, in fact, wants to cut corporate taxes down to 15 percent.

Romney's plan is the only realistic alternative to Obama's. Which raises the question: "Will Republicans and Democrats really fight it out over three percent?"

Of course they will, and it may come down to who's plan is really the more "revenue neutral." On its face, Obama's is, while Romney can't get his additional three percent without cutting spending. You can see the difference: Obama's plan gives with one hand but takes with the other; Romney's gives and then gives some more, by using corporate taxation — or lack of it — to reduce the size of government.

Corporations can't really argue that they need a tax cut right now. Taken as a whole, companies in the S&P 500 are sitting on a mountain of cash — something like $1 trillion. But they aren't investing it, and they aren't spending it on new workers.

How much is too much cash to carry on a balance sheet? At the moment, it seems you can never have too much. So as needless as Obama/Romney's corporate tax cuts seems, the extra funds could push companies over the edge. That might sounds a bit of a bribe — a way to get corporations to finally start spending, mainly on hiring.

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