14 Things You Need to Know About Obama’s New ‘Grand Bargain’
1. It’s not particularly grand. Nor is it necessarily a bargain. Or even new. It’s mostly a repackaged offer of proposals the president has offered before.
2. The president has been talking up corporate tax changes at least since his 2011 State of the Union address, and he said shortly before he won re-election that it would be something he should be able to get through Congress in his second term.
3. He’s been pushing for more infrastructure spending in various guises since 2009.
4. The 45 manufacturing institutes he called for Tuesday is up from the 15 he’d already asked Congress to fund — so far without success.
5. One new proposal announced Tuesday would allow companies to expense up to $1 million in investments, such as new plants and equipment — a big boon to smaller businesses.
6. The money for the new spending ostensibly comes from “timing gimmicks” that are peculiar to a corporate tax overhaul. A July 24 blog post by the Center on Budget and Policy Priorities says that reform would create a surge in revenues in the first few years — what CBPP called “timing gimmicks” — that would completely disappear by the second decade. The administration proposes spending that upfront windfall, which could come in part from accelerated collection of taxes that are owed from overseas accounts and the like.
7. Those “timing gimmicks” could theoretically generate tens of billions that could be spent and still keep the bill deficit neutral over the first decade.
8. The plan would not come close to closing the huge hole in the transportation trust fund opened up by the doubling of vehicle mileage standards mandated by the president.
9. The plan might comply with Americans for Tax Reform’s “no new taxes” pledge. That’s because the revenue surge wouldn’t come from raising tax rates or limiting deductions, but rather from timing effects.
10. The president’s proposal would reduce corporate rates from 35 percent to 28 percent or below 25 percent for manufacturing. He’d create a new minimum tax on overseas profits to dissuade companies from parking profits overseas to escape taxes.
11. In an olive branch to the GOP, Obama’s offer does not include an explicit tax increase. White House economic adviser Gene Sperling told reporters during a conference call Tuesday that the proposal would be revenue neutral over the long term. That’s been a deal breaker for earlier iterations of Obama’s jobs and budget proposals.
12. GOP leaders quickly shredded the idea, objecting primarily to leaving small-business owners paying the individual tax rate of as high as 39.6 percent — a rate Obama pushed through as part of the fiscal-cliff deal. And leaders say they don’t want another roads-and-bridges stimulus either.
13. The White House was hoping for a better reaction. After all, Speaker John A. Boehner, R-Ohio, himself has talked up the need for more infrastructure spending. And some Republicans in the past have pushed for a corporate tax overhaul, coupled with individual changes or not.
14. If there’s hope for the White House pitch, it would lie in the bipartisan group of senators who have been talking for weeks to Chief of Staff Denis McDonough and others in the administration about a budget pact. They’ve been backed by a potential push from big business groups that are historically allies of the GOP. But both parties’ leaders are focused for now on the crisis du jour — funding the government past Sept. 30.