AP on Obama’s tax plan: Loopholes for me but not for thee

posted at 9:15 am on February 24, 2012 by Ed Morrissey

Glenn Reynolds highlights this AP analysis of Barack Obama’s corporate-tax reform plan by writing, “Even the Associated Press isn’t buying this.”  Obama claims to close a large number of loopholes in order to create a “level playing field.”  However, the AP’s Christopher Rugaber discovers that Obama simply trades loopholes that favor those he dislikes for loopholes that suit his own purposes:

President Barack Obama wants to close dozens of loopholes that let some companies pay little or nothing in taxes. But he also wants to open new ones for manufacturers and companies that invest in clean energy.

To some analysts, the new loopholes risk upending the level playing field Obama says he wants to create.

Some also fear that companies could game the system to grab the new tax breaks.

You don’t say!  That is, after all, the purpose of tax loopholes.  Obama didn’t invent that novelty, but he certainly seems to enjoy using it. The biggest objection is Obama’s pious hypocrisy in his constant inveighing against loopholes while proposing even more — and it could be said that his stimulus gimmicks are nothing more than loopholes turned inside out.

One of the “loopholes” Rugaber points out is a slightly lower tax rate on manufacturers (25% as opposed to 28% overall), which isn’t so much a loophole as it is a two-tiered tax structure.  Rick Santorum proposes a similar structure, but with a much different rate for manufacturers … zero.  Some object to this in principle, as they don’t care the notion of government picking winners and losers, even on a meta scale.  However, Obama’s lower rate for manufacturers is barely noticeable — and it is completely obliterated by this provision:

Other economists oppose a separate plank of the Obama plan: a minimum tax on foreign earnings of U.S. multinational companies. No other country imposes such a tax on its companies, they note. U.S. businesses would face a competitive disadvantage.

That would hammer the manufacturers who have facilities located overseas, more than the service providers who have to locate where service delivery occurs.  That’s the point of Obama’s policy here — to punish manufacturers who build overseas rather than at home.  However, a three percent rate difference is hardly enough to overcome the competitive disadvantages of building in the US, and the “global minimum tax” will make American products even more uncompetitive abroad by forcing prices higher.  Remember that consumers pay business taxes, not the businesses, as all costs end up in the price of goods and services.

Rugaber is a little late to the loophole party.  Veronique de Rugy noticed it immediately, as I noted in an Obamateurism from almost two weeks ago.  Note that the new loopholes are hardly limited to “clean energy”:

Remember in the president’s State of the Union address how the line “no more bailouts, no more cop outs” was followed by proposals to do more bailouts? Well, President Obama continues this practice. His budget message derides “special-interest loopholes,” but then proceeds to provide more special-interest loopholes.

For instance, in addition to the tax credits that already exist in the budget, the president proposes 7 tax credits or cuts for families and individuals (such as an exclusion for student-loan forgiveness after 25 years of income-based or income-contingent repayment), 5 protectionist tax incentives (for expanding manufacturing and insourcing jobs, such as a new “manufacturing  communities” tax credit), and 6 tax-relief provisions or investments to create jobs and jump-start growth (including 3 new ones, such as a 10 percent tax credit for new jobs and wages, and a tax credit for energy-efficient commercial buildings).

And then there are the tax credits for medium- and heavy-duty commercial vehicles that use alternative fuels, the energy incentives, the new-market tax credit, the designated growth zones, the tax-exempt bonds for Indian tribal governments, and much more.

The AP might not be buying Obama’s anti-loophole propaganda, but that doesn’t mean Obama isn’t buying and selling with these provisions.


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Crony Presidency

Electrongod on February 24, 2012 at 9:21 AM

Cleen energy friends of the Emperor Zero, like Solyndra or LightSquared or what were the other three that also went bust?

minimum tax on foreign earnings of U.S. multinational companies. No other country imposes such a tax on its companies, they note. U.S. businesses would face a competitive disadvantage.

This makes his plan a large increase in corporate taxes, for those among us that are reality challenged libs.

dogsoldier on February 24, 2012 at 9:21 AM

It’s not leveling the playing field, it’s hobbling the ones who achieve something. Bring everyone down to mediocrity is not a goal anyone should be striving for.

TooTall on February 24, 2012 at 9:21 AM

Trumpet these shell games far and wide. I am tired of this fascist’s central-command economy that takes over sectors and picks winners and losers.

onlineanalyst on February 24, 2012 at 9:21 AM

Obviously, this plan isn’t meant to pass. He just wants to have a counterpunch when – in the election – BHO gets hammered by his republican opponenet (whoever the republican meathead is).

“I proposed tax reform,” the jacka$$ will say, “but the ‘do-nothing’ republican congress did nothing.”

Deafdog on February 24, 2012 at 9:22 AM

Eliminate all the tax loop holes for the ones that don’t pay taxes today. That is where any tax reform should start. Every entity should pay a reasonable share.

aniptofar on February 24, 2012 at 9:23 AM

Is there a tax break n there for those of us who are starting up algae farms?

dirtseller on February 24, 2012 at 9:23 AM

Trumpet these shell games far and wide. I am tired of this fascist’s central-command economy that takes over sectors and picks winners and losers.

onlineanalyst on February 24, 2012 at 9:21 AM

Indeed.

One of the “loopholes” Rugaber points out is a slightly lower tax rate on manufacturers (25% as opposed to 28% overall), which isn’t so much a loophole as it is a two-tiered tax structure. Rick Santorum proposes a similar structure, but with a much different rate for manufacturers … zero. Some object to this in principle, as they don’t care the notion of government picking winners and losers, even on a meta scale.

I’m guessing Morrissey isn’t part of the “some” who object to Santorum’s proposal.

Syzygy on February 24, 2012 at 9:28 AM

Is there a tax break n there for those of us who are starting up algae farms?

dirtseller on February 24, 2012 at 9:23 AM

Not unless you can smoke it.

Lost in Jersey on February 24, 2012 at 9:28 AM

manufacturers already have a lower tax rate. via a deduction called section 199. i am so tired of the idiots who talk about tax policy that dont ever ever mention that. its not NEW. and its been around since 2004 for gods sake.

t8stlikchkn on February 24, 2012 at 9:28 AM

This is the kind of stuff we conservatives should be talking about instead of hyperventilating over contraception or what Rick Santorum said in 2008.

Just sayin’ ABO 2012.

Happy Nomad on February 24, 2012 at 9:29 AM

I don’t think he knows what he is doing… but I forget–He won.

Elections have consequences.

steved95 on February 24, 2012 at 9:31 AM

Come November, we’ll open him an extra loophole.

Archivarix on February 24, 2012 at 9:32 AM

Is there a tax break n there for those of us who are starting up algae farms?

dirtseller on February 24, 2012 at 9:23 AM
Not unless you can smoke it.

Lost in Jersey on February 24, 2012 at 9:28 AM

Apparently you didn’t hear that algae is the new oil. It has to be because Obama said it was and he’s always on the cutting edge of automotive science.

So far his solution to high gas prices is:

1) Make sure your tires are inflated properly
2) Algae
3) (crickets chirping)
4) Unicorn Droppings

dirtseller on February 24, 2012 at 9:35 AM

The politicians are posturing; there will be no tax reform until 2013.

TouchdownBuddha on February 24, 2012 at 9:36 AM

I love this ad.

Obama/gas

jazzmo on February 24, 2012 at 9:36 AM

Hey Obama! Yeah you, stupid! Corporations don’t really pay taxes! How, you ask? Simple! They pass the cost on to the public (yeah, your so-called Unwashed Masses) in the cost of their products!!! They raise prices and cut hiring!!! Just how stupid are you, Obama?

Vntnrse on February 24, 2012 at 9:38 AM

Until dear leader proposes how $16B of earnings by Jeffery Immelt’s company will not escape paying its “fair” corporate tax bill…. meh.

Wealth redistribution… at the corporate level. “Fair” only applies to rich people – not favored corporations.

VietVet_Dave on February 24, 2012 at 9:38 AM

Once again, it’s not about the substance of his proposals. Just like the Jobs Act (or whatever ridiculous thing he called it) this is being presented for Republicans to vote against. Nothing more, nothing less. It’s election-year politics like never before seen on a national level. He’s making a mockery of the White House.

BKeyser on February 24, 2012 at 9:39 AM

Why would this surprise anyone. When Obama says ‘special interest’ he really means a group or industry that disagrees with him. If you’re one of his buddies, you aren’t a ‘special interest’ no matter how niche, irrelevant, or destructive supporting you will be.

PetecminMd on February 24, 2012 at 9:46 AM

Obama professes concern with where facilities are located.

He should be more concerned with where they are headquartered.
His policies may favor movement overseas.

tomg51 on February 24, 2012 at 9:46 AM

More tax credits – special interest loopholes so oil companies pay no taxes and oil companies get hammered again.

http://www.chevronenergy.com/renewable_energy/

http://www.shell.com/home/content/media/speeches_and_webcasts/archive/2010/voser_london_12102010.html

ConocoPhillips http://www.powerincooperation.com/en/pages/clean.html?utm_campaign=Non-Branded&utm_medium=PaidSearch&utm_source=Google&utm_content=Clean&utm_term=clean%20energy

http://www.exxonmobil.com/Corporate/energy_vehicle_algae.aspx

There’s a reason that they call themselves energy companies.

Shouldn’t we just get rid of all tax credits and loopholes for energy?

Joy

DarrelsJoy on February 24, 2012 at 9:46 AM

Germany has a tremendous manufacturing base. Why? It manufacturers pay no taxes – ON EXPORTS! This is the big difference between Santorum, Obama, etc. The WSJ doesn’t like giving manufacturers credits because they know the system will be gamed. But its hard to game the system if you don’t export. And so, companies get a big deduction by building German and exporting, with the added bonus of having the same objects for domestic consumption, already built there. It means that there are advantages to building domestically for them.

Combine this with a slashed regulatory regime, and we might get a new manufacturing base here. But the Won’s plan is a joke. Ask Gibson guitars if 3% is worth it.

deadite on February 24, 2012 at 9:49 AM

King Food Stamp is now King Loop Hole.

All hail King Loop Hole!

darwin on February 24, 2012 at 9:50 AM

Nothing constructive to say myself about this other than I utterly hate that little piss ant of a man. The day that he slithers out of the WH I am going to get so drunk celebrating I am sure I will forget my own name. I have to take breaks from the news some days so I don’t go freaking crazy hearing that lying, treasonous voice somewhere. Good riddance to bad rubbish.

jistincase on February 24, 2012 at 9:51 AM

Even if it was zero people will still have something to say. Boeing paying less than 6% effective tax rate while making 35 billion….patriots indeed.

residentblue on February 24, 2012 at 9:52 AM

I am getting the sense that this presidency is nothing more than Democrats trolling the nation.

There is no other explantation.

This man is unqualified to be a janitor in the White House, let alone President. It’s so bad that the media can’t even cover up his crap any longer.

milcus on February 24, 2012 at 9:54 AM

Gee, no kidding Ed ? I listed a few of the ” new” loopholes in another thread yesterday. Boeing , GE ? Obama definitely has a “cash for clunkers” mentality. Would you believe that Jeffrey Immelt had anything to do with this ? Nahhh, why investigate that ?

I’m seriously beginning to wonder about HA’s integrity lately.It seems as though HA is sinking into chequebook jounalism.

DevilsPrinciple on February 24, 2012 at 10:01 AM

dirtseller on February 24, 2012 at 9:35 AM

ooohhh … thanks for the update. So we’re supposed to inflate our tires with algae. I get it now.

Lost in Jersey on February 24, 2012 at 10:05 AM

Eliminate all the tax loop holes for the ones that don’t pay taxes today. That is where any tax reform should start. Every entity should pay a reasonable share.

aniptofar on February 24, 2012 at 9:23 AM

When will people like you learn that loopholes are the same thing as the deductions YOU take on your 1040 every year if you itemize deductions? 47 % of Americans pay NO taxes. Should we punish them, too ?

Shall we eliminate mortgage deductions, tax deductions,child care credits, etc ? What do you propose as revenue replacement ?

DevilsPrinciple on February 24, 2012 at 10:08 AM

Breathlessly waiting for Krugmanian Economic “Expert” sesqupedalian to show up and accuse Captain Ed of “lying” again about this tax plan.

Del Dolemonte on February 24, 2012 at 10:13 AM

I’m so tired of hearing about manufacturing this and that tax break and incentive. You know why there is no manufacturing in America anymore? Two words, U-nions. Get rid of unions (along with EPA, OSHA and the other 1000 govt agencies that cost manufacturers money) and things will be made here once again.

angryed on February 24, 2012 at 10:17 AM

Shall we eliminate mortgage deductions, tax deductions,child care credits, etc ? What do you propose as revenue replacement ?

DevilsPrinciple on February 24, 2012 at 10:08 AM

YES! Eliminate it all and lower the rates across the board. If you want to have 7 kids, go ahead, but don’t expect me to subsidize your kids for you. Same with buying a house. You want a $500K house, do it dude, but I don’t want to subsidize that mortgage for you by allowing you to deduct your interest every year.

angryed on February 24, 2012 at 10:19 AM

Breathlessly waiting for Krugmanian Economic “Expert” sesqupedalian to show up and accuse Captain Ed of “lying” again about this tax plan.

Del Dolemonte on February 24, 2012 at 10:13 AM

I was thinking the same thing, only with Bayam.

These two fools could be standing in the middle of a hurricane and if Krugman says there’s no wind, they’ll believe there is no wind.

angryed on February 24, 2012 at 10:20 AM

Some also fear that companies could game the system to grab the new tax breaks.

Nah! People and companies would NEVER do that! Right?

GarandFan on February 24, 2012 at 10:39 AM

Del Dolemonte on February 24, 2012 at 10:13 AM

I was thinking the same thing, only with Bayam.

These two fools could be standing in the middle of a hurricane and if Krugman says there’s no wind, they’ll believe there is no wind.

angryed on February 24, 2012 at 10:20 AM

They were the Beavis and Butthead of Captains’ Quarters, and have continued their Tradition of Excellence here at Hot Gas.

Del Dolemonte on February 24, 2012 at 10:40 AM

So far his solution to high gas prices is:

1) Make sure your tires are inflated properly
2) Algae
3) (crickets chirping)
4) Unicorn Droppings

dirtseller on February 24, 2012 at 9:35 AM

Don’t forget:
5) Trade in your car for a hybrid that doesn’t exist (hybrid minivan) and you can’t afford, and would only carry half your kids anyway.

Which probably leads to:
6) Have fewer kids (free sterilization, contraceptives and abortifacients anyone?)

toby11 on February 24, 2012 at 10:56 AM

I said this before in another thread, but it needs repeating.

The intent is not to clarify, but to add red tape, make the laws confusing, and add their own loopholes to sell to their friends.
..by friends, I mean themselves also.

askwhatif on February 24, 2012 at 11:02 AM

Hey Obama! Yeah you, stupid! Corporations don’t really pay taxes! How, you ask? Simple! They pass the cost on to the public (yeah, your so-called Unwashed Masses) in the cost of their products!!! They raise prices and cut hiring!!! Just how stupid are you, Obama?

Vntnrse on February 24, 2012 at 9:38 AM

Well said.

The best corporate tax reform would be to abolish these taxes altogether.

TomLawler on February 24, 2012 at 11:05 AM

Cleen energy friends of the Emperor Zero, like Solyndra or LightSquared or what were the other three that also went bust?

Hey, Ed, wasn’t there yet another company, visited by Biden, that just went bust?

askwhatif on February 24, 2012 at 11:06 AM

“…Obama simply trades loopholes that favor those he dislikes for loopholes that suit his own purposes.”

Plato smiled.

locomotivebreath1901 on February 24, 2012 at 11:20 AM

***

Shall we eliminate mortgage deductions, tax deductions,child care credits, etc ? What do you propose as revenue replacement ?

DevilsPrinciple on February 24, 2012 at 10:08 AM

I don’t follow. If you were to eliminate many of the individual itemized deductions, you’d trigger a flood of income tax revenue. What revenue needs to be replaced?

I think it’s high time Congress pull out a Schedule A and also line up all the federal income tax credits that can be claimed by individuals and have committee hearings on their merits. No itemized deduction was chiseled on the tablets that Moses brought down from Mt. Sinai.

The deductions for mortgage interest and home-equity-loan interest subsidize homeowners and overspenders. Smart?

The deduction for state and local income taxes and for real estate taxes subsidizes those who live in higher taxing localities. Smart?

The deduction for charitable contributions subsidizes those give to charities. Smart?

The deduction for medical expenses subsidizes those with significant medical expenses (given that it’s currently subject to a floor of 7.5% of AGI). Smart?

There are some miscellaneous itemized deductions (currently subject to a floor of 2% of AGI), but you get the picture.

Credits? I won’t bother listing them, except to say that the refundable ones ought to be trimmed or eliminated. The tax code shouldn’t be a form of welfare.

One piece of nonsense in the current code and perpetuated by Romney is the ridiculous phase outs for deductions and personal exemptions for high income earners. Stop hiding the tax increases in this manner. Just impose a higher graduated rate if you must.

In the end, let’s revisit these deductions in light of our experience. I’m not sure that individuals should be treated as business entities in the sense that their personal expenses–borne out in the current list of itemized deductions–should be considered analogous to legitimate deductions for businesses. I say add up your sources of income, have some income floor below which we don’t tax, and apply a set of LOW graduated rates (or a LOW flat rate). The reduction in compliance time would be hailed as a great achievement.

BuckeyeSam on February 24, 2012 at 11:24 AM

Is it any different than Moochelle coming back from her luxury ski vacation (after returning from her 1 month luxury Hawaiian vacation) and runs to a $250 to $10,000 a person fund raiser for her husband’s billion dollar campaign to say

“If any family in this country is struggling, we can not be satisfied with our own families’ good fortune,”

katablog.com on February 24, 2012 at 11:25 AM

YES! Eliminate it all and lower the rates across the board.

and you’ve see a Democrat eliminate and entitlement and lower taxes when?

katablog.com on February 24, 2012 at 11:32 AM

BuckeyeSam on February 24, 2012 at 11:24 AM

End ALL itemized deductions and credits. Everyone gets the standard deduction and, after that, everyone pays the same flat rate (which should be 15 percent). End all loopholes in corporate and business taxes and set a flat rate (again 15 percent).

I don’t care if revenue falls. Time for the govt. to do with less. This would help the economy boom. And it’s the fairest tax system we could get.

Bitter Clinger on February 24, 2012 at 11:33 AM

I’m thinking of going into the algae farming business.

Buy Danish on February 24, 2012 at 11:34 AM

The biggest objection is Obama’s pious hypocrisy in his constant inveighing against loopholes while proposing even more — and it could be said that his stimulus gimmicks are nothing more than loopholes turned inside out.

This douche would make the editor of Pravda (circa 1964) blush.

Tim_CA on February 24, 2012 at 12:08 PM

Mr Bojangles? Minstrel man wants to stick it to working people.

rjulio on February 24, 2012 at 12:20 PM

Remember that consumers pay business taxes, not the businesses, as all costs end up in the price of goods and services.

Obama proves almost daily that he does not understand this basic economic principle… or, more likely, he doesn’t care.

Raising hikes on business are never paid for by the companies. They are rolled into their overhead costs for simply being in business, and those overhead costs are rolled into the price of the goods or services they sell. It’s the consumer who pays those taxes, not the businesses.

This is Econ 101 crap… hell, it isn’t even that… it’s just plain common sense. A 10 year old could figure this out.

Then again, the budget he plays with is comprised entirely of taxpayer money, which is an altogether different animal from the way commercial businesses operate. So, maybe he really doesn’t understand how businesses actually work.

gravityman on February 24, 2012 at 12:27 PM

errr… Raising taxes, I meant… or Tax hikes… not Raising hikes… that makes no sense.

gravityman on February 24, 2012 at 12:27 PM

Some people have to eat peas!

KOOLAID2 on February 24, 2012 at 9:42 PM

In totally non-related news, Jeff Immelt announced that henceforth GE will stand for “Green Energy”

Huckabye-Romney on February 25, 2012 at 5:24 AM