The president’s proposed changes to the corporate and individual tax codes would be hard to implement, partial overhauls of what both parties agree is a broken tax system.
Obama’s idea to place a minimum tax on American companies’ overseas profits could bring more revenue to the government. That is, if it gets past the well-funded resistance of global multinational companies that have spent years perfecting the art of minimizing their tax base. His other tax plan to reduce tax rates for manufacturers sounds good on paper, but it won’t necessary create jobs in the U.S. That’s more of a macroeconomic issue, related to the health of the economy and Americans’ education level. (Can Americans do skilled technical jobs as cheaply as, say, the Chinese?)
On the individual income side, President Obama wants to tax the wealthy more heavily and ensure, as part of the “Buffet Rule,” that households that make over $1 million pay at least 30 percent in income taxes. But, rival Mitt Romney’s tax plan shows the difficulty of that strategy, especially if the tax rate on investment income remains at 15 percent.
The final bucket of cold water on the president’s populist message? Raising taxes on millionaires and curbing their tax breaks attacks just a small slice of the government’s revenue issue. The upper class and middle class receive the bulk of the tax breaks in the current code: from mortgage tax deductions to child tax credits to deductions for state and local taxes. If the president is serious about reducing the deficit and making the tax code simpler, he’ll have to ask the middle class to take a hit financially and give up some or all of these politically popular deductions. And, taxing the middle class was certainly not a theme in Tuesday night’s message.