Conservatives Beat the Drum for Permanent Corporate Tax Cuts
WASHINGTON, D.C—As the LA Times reported today, conservative support in Congress for President-elect Barack Obama’s proposed economic stimulus plan is “peeling off” in favor of “alternative ideas that rely even more heavily on tax reductions.” Leading this charge, the Republican Study Committee, or RSC, released its preferred stimulus outline yesterday, which Matthew Yglesias noted is a “barrel full” of permanent tax cuts.
Today, Rep. Eric Cantor (R-VA) convened a hearing to further discuss the ideas that the RSC laid out, with testimony provided by former Gov. Mitt Romney (R-MA), former Ebay CEO Meg Whitman, and Grover Norquist, president of Americans for Tax Reform. During the hearing, all the witnesses continued to beat the drum for permanent tax cuts, especially for corporations:
ROMNEY: The best medicine for a sick economy is permanent tax relief… [corporate tax cuts] would remove fear and replace it with confidence and prosperity.
WHITMAN: The number one thing that I would look at for this group is: can we lower business taxes?…I would argue that permanency and clarity are what to look for.
NORQUIST: I would argue for permanent tax cuts…That would create real and permanent stimulus.
Cutting corporate taxes is a tired conservative solution to just about everything. Remember, it was a centerpiece of Sen. John McCain’s (R-AZ) presidential campaign, even before the economic crisis hit. But as the Center for American Progress’ Will Straw wrote, permanent corporate tax cuts simply fail to provide stimulus:
The track record for such steps is poor in general, but they are particularly ill-suited for a recessionary period. After all, the reason that businesses and individuals are not investing at the moment has little to do with the taxes they may pay in the future and everything to do with a fear of losing money because there is no demand in the economy, asset prices are highly volatile, and credit is hard to come by.
Citizens for Tax Justice noted that “every dollar lost from cutting the corporate income tax would increase real GDP by just 30 cents.” That’s hardly the sort of stimulative effect that would justify slashing the corporate rate.