Republican lawmakers blasted a proposal by President Obama on Tuesday
to cut corporate taxes in exchange for more spending on job-training programs,
calling it a revival of a failed plan that would raise taxes initially.
"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," said Senate Minority Leader Mitch McConnell, Kentucky Republican. "The tax hike it includes is going to dampen any boost businesses might otherwise get to help our economy."
Mr. Obama visited an Amazon.com distribution center in Chattanooga, Tenn., to outline his proposal, which he called a "grand bargain" to create more middle-class jobs.
"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," the president said. "That's the deal."
The president proposed cutting the corporate tax rate from 35 percent to 28 percent, with a further reduction to 25 percent for manufacturers. He proposed the same rate cuts in early 2012 during his re-election, without attaching the proposal to spend more on job training.
The U.S. corporate tax rate is higher than in many other industrialized nations. Germany's corporate tax rate is 29.55 percent and the overall average in Europe is 20.66 percent. Japan's rate is higher, at 38.01 percent; in Canada, the rate is 26 percent; in India, 32.45 percent.
Mr. Obama said the money gained from closing corporate tax loopholes should be spent on infrastructure projects, on job training and high-tech manufacturing hubs in which private industry collaborates with universities.
"If we're going to give businesses a better deal, then we're also going to have to give workers a better deal, too," he said. "The middle class was struggling before I came into office."
White House economic adviser Gene Sperling wouldn't say how much new tax revenue would be raised or what amount would be spent on job training, indicating those details would be left up to negotiators if the plan moves forward. Republicans said the proposal likely would raise tens of billions of dollars initially.
The move creates an awkward position for Sen. Charles E. Schumer, New York Democrat and member of the Finance Committee, who said last October that it was "imperative" for corporate tax reform to be revenue-neutral.
On Tuesday, Mr. Schumer said he supports the president's proposal and others that Mr. Obama is outlining in a series of economic speeches.
"While deficit reduction continues to be an important goal, more and more decision-makers are realizing that our greatest problem is the decline in middle-class incomes," Mr. Schumer said. "With these speeches, the president is adroitly and powerfully beginning to move the debate in that direction. It is both substantively and politically the right thing to do."
Mr. Sperling said corporate tax reform would be revenue-neutral in the long run, and that Mr. Obama's earlier proposals for corporate tax reform always envisioned a "one-time" increase in tax revenue.
"That money can't responsibly be used to lower rates because it doesn't sustain itself," Mr. Sperling told reporters.
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