‘Grand bargain’ or no, corporations come out ahead, right?
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Right now, the corporate tax rate is 35 percent. President Obama would lower it to 28 percent. Big gift to business, right? Not exactly, says Bill Gentry, a tax economist at Williams College.
“The headline seems to be we’re lowering corporate tax rates but then you look below the headline and it says, oh, but we’re going to raise revenue with this.”
President Obama wants to raise revenue by eliminating dozens of corporate tax breaks — deductions that let multinational corporations stash cash in tax havens overseas. Right now, big multinationals pay an average tax rate of only around 12 percent, lower than even the 28 percent President Obama is proposing. So they’d lose out under the president’s plan. But there would be winners, according to Anne Mathias, a tax expert at Guggenheim Partners.
“The real winners would be domestic U.S. companies that don’t have a lot of international operations,” she says. “Some of the domestic health care services companies, domestic restaurant chains.”
Mathias says these companies don’t get the big tax breaks because they don’t have big international profits. They’re paying close to the full corporate rate. So that 28 percent rate President Obama wants would be a tax cut for them. And there’s one more, huge winner. Howard Gleckman is a tax analyst at the Tax Policy Center in Washington. He says lobbyists are already telling their multinational clients — we can fight the president’s plan! For a price…
“They’re all sending out their alerts to their members and saying, you’re going to have to hire three more lawyers, and this is going to be the biggest fight of your life,” he says. “So this is wonderful if you’re a lobbyist.”
Gleckman doesn’t expect companies that would win under the president’s plan to do much lobbying. He says the losers always scream louder than the winners.