Lowering Corporate and Manufacturers' Tax Rates Is Problematic

President Barack Obama is proposing to lower the corporate tax rate to 28 percent and close some tax loopholes; also, some manufacturers would get a tax rate of 25 percent. There are a number of reasons why these tax proposals might not be a good idea:
1) the Congressional Budget Office has found that about two-thirds of U.S.-chartered corporations do not pay any federal income tax;
2) a study of the top 100 companies in the Fortune 500 found they pay their CEOs more than they pay in federal income tax;
3) several surveys have shown that businesses list lack of consumer demand, not taxes, as the major reason they cannot expand or hire more workers;
4) before the Reagan tax cuts, corporations provided about three times as much in federal government revenues as they do today -- they also provided almost double the revenue of state governments as they do today;
5) closing the loopholes previously identified by President Obama would not make a significant dent in the national government's budgetary debt;
6) although U.S.-chartered corporations have a higher income tax rate than do most of the other industrialized nations, when you factor in exemptions, deductions, generous depreciation rules and  credits, U.S. corporations wind up paying lower rates than the aggregate of the other industrialized nations; and
7) since the U.S. Supreme Court found in Citizens United that corporations could contribute unlimited amounts of money to political campaigns, they should not be taxed at a lower rate than that of the higher income tax brackets -- if corporations are people they should pay at least the same rate as the higher bracketed individuals do.

In regard to number 4), the period after World War II was a time of economic prosperity, yet corporations were much more heavily taxed than they are today.

President Barack Obama has largely bought into the GOP position that lowered taxes are the solution for many of the nation's economic problems. Obama has made frequent mention of how much he has cut middle-class taxes in his tenure in office. Withe the extension of the payroll tax cut through 2012, the total tax cuts in the last three years will approach the $1 trillion mark. Since the latest Obama proposal on revenue is to raise $1.5 trillion over the next ten years, two crucial questions must be asked: 1) Will that $1.5 trillion be an aggregate increase of about $2.5 trillion to cancel out the nearly $1 trillion already cut? and 2) How much of the tax increase will take place after President Obama has left office, assuming he wins a second term?

We don't know, of course, if President Obama is done cutting taxes: for instance, if recent signs of an economic recovery prove to be illusory and the economy seriously falters, wouldn't Obama be almost compelled by his argumentative rhetoric of the recent past to seek another extension of the payroll tax cut, at minimum? The 2012 payroll tax cut is seen as a big political victory for Obama but it carries within it the seeds of future serious budgetary trouble.