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Obama’s Tax Cut Hypocrisy

Brookings scholar: Obama doesn’t specify how he’ll pay for $1.3 trillion corporate tax cut.

2:22 PM, Oct 16, 2012 • By JOHN MCCORMACK
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“There is one obvious rejoinder available to the president and his allies,” writes Reihan Salam. “[I]f further cuts to tax expenditures prove unpalatable, the cut to the corporate tax could be smaller than 7 percentage points. But of course the same could be said of Romney’s income tax proposal.”

Obama also cites the Tax Policy Center to argue that Romney’s tax reform plan is mathematically impossible, but the TPC analysis is deeply flawed. Princeton economist Harvey Rosen’s study shows Romney’s tax plan is mathematically possible under "plausible" growth assumptions. And the Tax Policy Center's own calculations show that Romney's tax plan is mathematically possible if you correct for two or three erroneous assumptions.

So, even as Obama lambastes Romney for not being specific enough on taxes, the president himself leaves a lot of questions unanswered about his own corporate tax reform plan. But the bigger issue here may not be the fact that Obama's tax plan also lacks specifics, but that the rationale of his corporate tax reform proposal undercuts his call for higher income taxes.

Obama is proposing to lower the corporate rate to 28 percent—and 25 percent for manufacturers—but he wants to raise the individual income tax rate—paid by many small businesses—to 40 percent, while carving out more loopholes for small business. Does that make any sense? If lowering marginal tax rates is a good incentive for businesses to be more competitive and increase productivity, then why isn’t it good for small businesses?

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