President Barack Obama, seeking to break Washington’s fiscal stalemate, is proposing cutting corporate tax rates in exchange for more spending on jobs programs. But his offer was immediately panned by congressional Republicans, casting doubts about its prospects.
The White House painted the new offer as a way for Washington to create jobs and generate short-term economic growth even as hopes for a grand deficit reduction deal fade. Obama was to announce his proposals Tuesday during a trip to an Amazon.com distribution center in Chattanooga, Tenn.
“We should be looking for other avenues of progress, other ‘grand bargains’ that can be for middle class job growth,” White House economist Gene Sperling said.
The president has previously insisted such business tax reform be coupled with an individual tax overhaul. His new offer drops that demand and calls only for lowering the corporate rate from 35 percent to 28 percent, with an even lower effective tax rate of 25 percent for manufacturers.
Obama wants those rate changes to be coupled with significant spending on some sort of job creation program, such as manufacturing, infrastructure or community colleges.
Congressional Republicans have also long insisted on tying corporate and individual tax reform so that small business owners who use the individual tax code would be offered cuts along with large corporations. But they oppose using the revenue generated from changes in the corporate tax structure for government spending programs.
“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.
Senate Minority Leader Mitch McConnell, R-Ky., said Obama’s plan could hurt small businesses that file taxes as individuals. He called on the president to reconsider his proposals and consult with Congress before moving any further.
But signaling that the White House may not be in the mood to compromise further, Obama communications director Jennifer Palmieri said the new “bargain” the president is proposing, “isn’t supposed to be for the Republicans. It’s supposed to be a bargain for the middle class.”
Senior administration officials described the corporate tax proposal as the first new economic idea Obama plans to offer in the coming months, with budget deadlines looming in the fall. Administration officials wouldn’t put a price tag on the proposal or say how much would be a “significant” investment in jobs since the dollar figures would be part of negotiations with Congress. But in an example from this year’s State of the Union address, Obama proposed $50 billion to put Americans to work repairing roads and bridges and other construction jobs.
The officials said money to pay for the jobs creation would come from a one-time revenue boost from measures such as changing depreciation rules or having a one-time fee on earnings held overseas.
Obama planned to make his remarks from an Amazon fulfillment center in Chattanooga, one of more than a dozen warehouses operated by the world’s largest online retailer, which announced Monday that it would increase hiring. The company said it would add 7,000 new jobs, including 5,000 more at U.S. distribution centers that currently employ about 20,000 workers who pack and ship customer orders. Amazon.com Inc. has been spending heavily on order fulfillment to help its business grow.
Obama planned to tour the packing floor of the Chattanooga warehouse, which opened in September 2011. It is one of the company’s largest and newest facilities, with more than 1 million square feet — the size of more than 28 football fields full of merchandise.
The plant was the source of tax controversy when it opened; Amazon originally was granted an indefinite waiver on collecting sales tax in a deal to bring two distribution centers to Tennessee. The state’s retailers were outraged that they were put at a competitive disadvantage, and Amazon has agreed to start collecting Tennessee sales tax next year.
The White House said Obama wasn’t visiting Amazon because of the company’s position on taxes, but because it’s an example of a successful American business growing and creating more jobs.
. The U.S. has one of the highest corporate tax rates in the world, but many businesses avoid the full cost by taking advantage of deductions, credits and exemptions that Obama wants to eliminate.
Obama wants to do away with corporate tax benefits like oil and natural gas industry subsidies, special breaks for the purchase of private jets and certain corporate tax shelters. He also wants to impose a minimum tax on foreign earnings, a move opposed by multinational corporations and perhaps the most contentious provision in the president’s plan.
When Obama unveiled the corporate tax plan last year, congressional Republicans called for even deeper cuts for the business world. His campaign rival, Mitt Romney, wanted a 25 percent corporate tax rate.