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Obama Offers to Cut Corporate Tax Rate as Part of Jobs Deal Obama Offers to Cut Corporate Tax Rate as Part of Jobs Deal
(35 minutes later)
WASHINGTON — President Obama, in a bid to break a stalemate with the Republican-controlled House, revived on Tuesday his proposal to cut corporate tax rates in return for a commitment from Republicans to invest more in programs spurring middle-class jobs. CHATTANOOGA, Tenn. — President Obama, seeking to break a stalemate with Republicans, announced here Tuesday that he would cut corporate tax rates in return for a pledge from Republicans to invest in more programs to generate middle-class jobs.
Using a cavernous Amazon distribution center in Chattanooga, Tenn., as his backdrop, Mr. Obama described a “grand bargain” on jobs that White House officials say will stimulate the economy, as well as give businesses the lower tax rates they have long sought. It is the first new proposal of his economic offensive, setting the stage for the fall budget fights with Congressional Republicans. But the packaging is what is new, not the ideas. Using a sea of cardboard boxes in a cavernous Amazon distribution center as a backdrop, Mr. Obama described a “grand bargain” for the middle class that he said would stimulate the economy while giving businesses the lower tax rates they have long sought.
The terms of Mr. Obama’s tax plan are those that Timothy F. Geithner, his former Treasury secretary, first proposed in early 2012, as the presidential campaign was getting under way: the corporate tax rate would be reduced to 28 percent, from 35 percent, with a lower rate of 25 percent for manufacturers. “If folks in Washington really want a ‘grand bargain,’ how about a grand bargain for middle-class jobs?” Mr. Obama said to a crowd of 2,000. “If we’re going to give businesses a better deal,” he added later, “we’re going to give workers a better deal, too.”
At the time, Mr. Obama’s ultimate Republican rival, Mitt Romney, was proposing a 25 percent corporate rate, the same level that Republicans in Congress espouse now. It was the president’s first concrete proposal in an economic offensive that he inaugurated last week in Galesburg, Ill. with a speech that was meant to set his terms for a debate this fall with the Republican-controlled House over fiscal issues.
While the White House is advertising the move as a big concession, Republicans dismissed the proposal even before the president had spoken in Tennessee, based on advance news reports. But only the packaging was new.Mr. Obama’s speech cobbled together two existing initiatives that have been stalled in Congress: corporate tax reform and his plan to create jobs through education, training, and public-works projects.
“It’s the opposite of a concession,” said Brendan Buck, a spokesman for House Speaker John A. Boehner, Republican of Ohio. The terms of Mr. Obama’s tax plan were outlined in early 2012 by Timothy F. Geithner, his former Treasury secretary, who said the corporate tax rate would be reduced to 28 percent, from 35 percent, with a lower rate of 25 percent for manufacturing firms.
For two years, Republicans have rejected the bulk of Mr. Obama’s initiatives to create jobs by investing in public-works projects, higher education, advanced manufacturing and scientific research. A big reason was that he previously has paired those ideas — to offset the spending and avoid adding to annual budget deficits — with proposals to repeal or reduce tax breaks for wealthy individuals and corporations, especially oil companies, that Republicans reject. While Mr. Obama presented the proposal as a concession, Republicans dismissed it even more acidly than usual, saying it was less a “grand bargain” than an effort to extract a new fiscal stimulus program while offering a cut in corporate taxes that would end up raising billions of dollars in new revenue.
The White House did not offer details on whether its corporate tax cut would have to go hand in hand with reductions on current tax breaks for businesses. A separate complication for the administration, in seeking a different, lower tax rate for manufacturing companies, would be in defining manufacturing for purposes of assessing which corporations would qualify. “It’s the opposite of a concession,” said Brendan Buck, a spokesman for House Speaker John A. Boehner.
The administration also was not specific about the jobs spending, though Mr. Obama’s priorities have been clear since he first outlined them in an address to a joint session of Congress in September 2011, and he has proposed details since then in his annual budgets. But the House has ignored the proposals. For two years, Republicans have rejected most of Mr. Obama’s initiatives to create jobs, in part because the president, to avoid swelling the budget deficit, has paired those ideas with proposals to repeal or reduce tax breaks for wealthy individuals and corporations, especially oil companies – which Republicans steadfastly reject.
Many Republicans and Democrats argue that an overhaul of corporate taxes should be done along with a rewrite of the tax code for individuals. Republicans say that is necessary because many smaller businesses file their tax returns using the individual tax code. The White House did not disclose the size of the jobs program, but in his last State of the Union address, Mr. Obama promoted a $50 billion plan to put people to work repairing roads and bridges.
While in the past the administration pressed to cut corporate tax rates as a stand-alone proposal, on Tuesday it was describing the president’s initiative to do so as a concession. White House officials said Mr. Obama has previously made a cut in corporate taxes contingent on raising taxes on wealthy individuals. By presenting the corporate tax cut as a stand-alone proposal, the White House hopes to make it more palatable to Republicans.
In February 2012, Mr. Geithner said the corporate tax plan that Treasury had worked on for two years was designed so that you could do cut corporate taxes alone. But he said he understood the argument for doing an overhaul of corporate and individual taxes together, adding, “That may be the way this comes out.” Republicans, however, have shunned any tax reform that is not “revenue neutral,” meaning it does not add or subtract to the federal budget deficit. They insisted on Tuesday that Mr. Obama had made a similar pledge last March.
Corporations and their Republican allies have long argued, correctly, that the 35 percent corporate tax rate is among the highest in the industrialized world, and undercuts the competitiveness of American businesses. However, numerous tax breaks unique to the United States allow many corporations to significantly reduce or even wipe out their tax liabilities. White House officials said the proposal, because it would overhaul the tax code rather than simply cut rates, would raise revenue on a one-time basis by eliminating loopholes and imposing fees on companies with accumulated foreign earnings.
Mr. Geithner and Republicans have said that overhauling the corporate code should be done in a way that neither adds to nor subtracts from the deficit. But many Democrats say that any revenue from closing tax breaks should be used only partly to reduce corporations’ tax rates and that some savings should be used to reduce deficits. Those funds, the officials said, could be used to finance the investment in jobs. Longer-term, they insisted, Mr. Obama still supported tax reform that would be revenue-neutral.
Corporations and their Republican allies have long argued, correctly, that the 35 percent corporate tax rate is among the highest in the industrialized world, and have contended that it undercuts the competitiveness of American businesses. However, numerous tax breaks unique to the United States allow many corporations to significantly reduce or even wipe out their tax liabilities.
The White House and Republicans also clashed over Mr. Obama’s contention that decoupling corporate and individual taxes was a concession. Mr. Buck said Republicans have long sought to link the two, in part because so many small businesses are taxes as individuals.
In truth, say analysts, both the White House and the Republicans have been increasingly open to separating the two, though neither likes to advertise it. In 2012 Mr. Geithner said the corporate tax plan that Treasury had worked on for two years was designed so that one could cut corporate taxes alone.
Even the White House’s rollout became an excuse for finger-pointing. The White House spokesman, Jay Carney, said administration officials briefed Democratic and Republican lawmakers on Monday evening. But Mr. Buck said the Republican leadership learned of the initiative from the news media.
Many of the lines in Mr. Obama’s speech echoed his remarks in Illinois last week, giving it the cadence of a campaign speech with the fulsome detail of a State of the Union address.
Mr. Obama also delivered a veiled dig at the Keystone XL pipeline. While he did not name it, he said a certain “oil pipeline” would generate only 50 permanent jobs in the United States. The State Department has not yet decided whether to approve it, and Mr. Obama has sounded increasingly skeptical.
The choice of Amazon was meant to illustrate Mr. Obama’s theme of a job revival in the United States. The company recently announced plans to hire 5,000 more workers at 17 fulfillment centers around the country, where it packs and ships customer orders.
But the White House came under fire because many Amazon jobs pay only $11 an hour, and the pace of the work in these warehouses has been described as exhausting.
On his tour of the plant, Mr. Obama stopped at stations where workers were sorting and packing bottles of Metamucil and bags of pistachio nuts. “I’ve got a bunch of orders in there,” the president said, gesturing to a bin filled with boxes.
Mr. Obama’s appearance here also raised the hackles of independent booksellers, who blame Amazon for driving bookstores out of business. Amazon is the nation’s biggest seller of books, and its deep discounting and massive selection has lured away many customers.
The American Booksellers Association argued in a letter to Mr. Obama that Amazon’s gains have come at the expense of small businesses.
“We are disheartened to see Amazon touted as a ‘jobs creator’ and its warehouse facility used as a backdrop for an important jobs speech, when, frankly, the exact opposite is true,” the letter said.

Julie Bosman contributed reporting from New York.