WASHINGTON – President Barack Obama on Tuesday proposed spending more on creating jobs in exchange for an overhaul of business taxes. But the idea quickly devolved into the type of partisan finger-pointing that shows why any agreement will be so difficult.
With great fanfare, Obama and his aides promoted what they called a new “grand bargain” that would sidestep disagreements and focus on a longtime Republican goal: a rewrite of the business tax code to lower corporate rates.
The overhaul, administration officials said, would generate new revenue that could be used to pay for Obama’s priorities, including hiring workers to build roads, bridges and other infrastructure.
“Here’s the bottom line: I’m willing to work with Republicans on reforming our corporate tax code, as long as we use the money from transitioning to a simpler tax system for a significant investment in creating middle-class jobs. That’s the deal,” Obama said Tuesday during a speech at an Amazon.com warehouse in Chattanooga, Tennessee.
The visit was part of his summer campaign to highlight his economic message and frame the fall debate over the federal budget. “If folks in Washington want a ‘grand bargain,’ how about a grand bargain for middle-class jobs?” Obama asked rhetorically.
But within hours, Republican leaders in the Senate and House had ridiculed the idea as a tired repackaging of old proposals. “It’s just a further-left version of a widely panned plan he already proposed two years ago, this time with extra goodies for tax-and-spend liberals,” Senate Minority Leader Mitch McConnell said.
In principle, an overhaul of the corporate tax code could offer room for compromise for both sides. Republicans and Democrats generally agree that the corporate tax code is unnecessarily complex, has excessively high official rates and hurts U.S. competitiveness globally.
The Obama administration and key congressional Republicans, such as House Ways and Means Committee Chairman Dave Camp of Michigan, also agree that U.S. companies that have amassed profits overseas should pay a tax or fee to bring those funds home. About $2 trillion in such profits remain abroad. A fee on foreign profits could go a long way toward paying for the jobs proposals Obama wants, which also include opening manufacturing institutes and investing in community colleges to train workers. Obama has proposed $50 billion in jobs-related spending.
White House officials said Tuesday that it makes sense to try to strike a broad agreement on what the two sides agree on even if compromise remains elusive on more contentious topics, such as a long-term budget deal that involves cuts to the social safety net and new tax revenue.
However, Obama’s proposal did little to bridge the huge disagreements that remain. While the White House has advocated a new corporate tax rate of 28 percent, Republicans are pushing for a lower rate and have rejected the idea of using added revenue for new federal spending.
“This proposal allows President Obama to support President Obama’s position on taxes and President Obama’s position on spending, while leaving small businesses and American families behind,” said Michael Steel, a spokesman for House Speaker John Boehner.