Why so little love for Obama's corporate tax plan?

Instead, a lot of commentators on the right have basically responded by denouncing the plan. Jim Pethokoukis at AEI calls the plan “a total bust.” Why is it a bust? Jim shares some of my objections–to the manufacturing and worldwide tax provisions–but those strike me as reasons that the plan needs to be changed, not that it is a bust. Jim’s overarching, un-fixable objection seems to be that Obama should have proposed a large net reduction in corporate taxes.

It’s true: the Obama plan would entail a modest increase in corporate tax collections–$250 billion over a 10-year period when expected corporate tax receipts are $4.42 trillion. Pethokoukis denounces this tax increase, and highlights the economic distortion–damage–caused by corporate taxes.

But the thing is that not all corporate taxes are created equal. The deadweight loss of a tax is a function of the tax rate squared, which means that for a given amount of revenue, the economic damage is less when a tax has a broad base and a low rate. Base broadening also reduces the incentive for tax-avoidance activities, which impose their own economic costs. When corporations have fewer options to invest in tax-preferred sectors, they make their investment choices based on what will generate the most pre-tax profit.