President Obama’s tax plan announced yesterday claims to simplify the tax code and make it fairer. This being an election year it is more likely his proposal is designed to attract votes instead of Congressional approval.
His plan proposes to reduce the top corporate income tax rate from 35 to 28 percent in exchange for eliminating some “loopholes” placed in the tax code in the past to reward cronies, promote public policy and misdirect investment. But as Danielle Kurtzleben wrote, “How effective the proposal might be is a matter of perspective.”
If one is a tax attorney the tax plan could reduce his workload as a lower tax rate, if it worked, would reduce somewhat the incentive to find so-called tax shelters. It might cost less to pay the lower taxes than hire accountants to find ways around them. As Thomas Lys, professor of accounting at Northwestern, keeping tax rates where they are means that “We’re not better off, but lawyers and accountants are better off, because they make money on creating these monsters.”
If one owns a company that invests heavily in research and development, he will like Obama’s plan to expand some of his tax credits. And his plan to limit manufacturers from paying more than an effective rate of 25 percent will be music to those most likely to contribute big bucks to keep Obama in office. Steven Schier, a political science professor at Carleton College, said “I really don’t think that a lot of businesspeople are going to be changing who they support based on Obama’s new proposal. But what it may do is…allow him to raise more money from people in the business community who are already sympathetic to him.”
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Photo: President Barack Obama signs H.R. 3630, February 22, 2012: White House Photo