Obama's Corporate Tax 'Grand Bargain'

Obama wants to give middle-class Americans a ‘grand bargain’. Roll up! Roll up! You won’t believe your eyes. Obama has his sights set on a reduction in corporate tax to give businesses the extra push they need in the economy and also to get people working again. A ‘grand bargain’ was how he termed it. A ‘grand bargain’ for companies and an even grander one for the people out of work at the moment. It might not have been so laughable had he not been speaking in an Amazon distribution warehouse in Chattanooga, Tennessee against a backdrop of empty boxes. It looked more like the removal men had come in, boxed up everything and were ready to foreclose on the guy. To boot, Amazon are hardly in need of yet further tax breaks, are they? Do they actually pay any tax at all? Perhaps, Mr. Obamashould have chosen the site of his speech Tuesday unveiling his great grand plan for the fight against unemployment in different circumstances.

Corporate Tax

We already know that Amazon doesn’t collect sales tax from more than ten states in the US, thus giving it the added advantage over bricks-and-mortar shops that have to collect it. Amazon only collects it where it is physically present, arguing that the sales tax doesn’t have to be collected if they are not actually selling in that state. Remember that Amazon pulled out of Dallas, Texas because there was a dispute over the application of a sales tax there. The same thing happened in Illinois and in Colorado. If Amazon is forced to pay tax, they pull out. Now, Obama wants a corporate tax cut? Amazon also adds £35 millionto the UK’s tax gap by avoiding paying any corporate tax in the country, and that’s after making sales worth £3.3 billion in the UK alone (via the Luxembourg sandwich). Sales are routed through the subsidiary located in Luxemburg, where the EU headquarters for the company are located, thus avoiding taxation.

Unemployment in the US

Obama is coming in for a very tough time with Republicans and either a showdown or a stalemate position seems all he might end up with this fall as he argues his budget out in the House of Representatives. Obama said “If folks in Washington really want a ‘grand bargain,’ how about a grand bargain for middle-class jobs?”

He went on to declare that “If we’re going to give businesses a better deal, we’re going to give workers a better deal, too”.  Better deal? Big Deal! Hey, hang on, doesn’t that smack of someone else? The Great Depression 1930s, New Deal, Tennessee, Relief, Recovery and Reform, Franklin D. Roosevelt. The Great Recession 2008-2012, Grand-Deal speech in Tennessee, Cuts, Jobs and Middle Class, Barack H. Obama. Well, well, well! Who would’ve thought? Mighty similar all of that! Does this mean that Obama will bring us back on to the road to recovery and go down into the annals of history, recorded as the man of the moment that got us out of it, when we were up it without a paddle? Is this his First Grand Deal or the Second?

Corporate Tax : Cut? Bargain?

Obama is going to have to do something at least since the average person in the USA today is still unemployed and has been under his presidency for 36weeks. Unemployment still remains at 7.6% according to the Bureau of Labor Statistics for June 2013 and we are waiting on the figures for July 2013. Long-term unemployed (people out of work for more than 27 weeks) has increased exponentially under the Obama presidency. Granted, the financial crisis came along and scuppered all of the attempts that might have been made. But, quite honestly, we are not here to be magnanimous in life, we want unemployment to disappear. Being understanding isn’t why we vote politicians into power. It’s to get the policies right, whatever the situation. Falling back on the hardship of the financial crisis and using that as a crutch to lean on isn’t going to wash with many people, is it? In January 2009, long-term unemployment stood at 22.6%. After one year in office it had risen to41.6%. By 2011 it was up again to 43.8%. The following year the average monthly rate was 41.1%. Today there are 4.3 million long-term unemployed in the US. That means there are 36.7% of all the unemployed people in the US that have been on the dole for more than 27 weeks.

But, the Grand Deal proposed by Obama is nothing new, not only because it finds its origins in history and other great periods when we are in a depression and a recessionary slump, but also because he is combining what he has already served up to us before. Corporate tax has already been on Obama’s agenda, but it hit the rocky road to Congress and ended up being put on the back-burning. Although, it seems highly unlikely that Obama has the power to push anything through the House of Representatives at the present time. The second element that we have seen before is jobs thanks to public works programs and training. Obama combined the two here in Tennessee in his Grand Deal and dished them up to us once again. Don’t you just hate left-overs that have already been chewed over once before?

In 2012, Obama intended to reduce the corporate-tax rate to 28% (from 35%), with a rate of 25% for manufacturing companies. Giving the speech at Amazon looks as if it will also come under scrutiny not only for Amazon’s poor record on taxation, but also because they pay a measly $11 an hour, which is hardly enough to live on for a family. That’s also despite the fact that the company has recently announced it will be hiring 5, 000 workers across the US to work in the warehouses.

Middle-Class Jobs?

Perhaps Obama should have chosen a different setting for that speech. The Grand Bargain or the Grand Deal? Only time will tell if it enters history. But remember that ‘bargain’ means something that is offered at a low price, an advantageous purchase in which something is acquired at a lower price than the market offers. I can see the bargain for the drop in corporate tax for the companies. I can see the bargain for the administration (since a change in the tax rate usually brings in a one-off increase in the revenue from that tax for the state).

But, what are the middle class getting? Or are they the ones that are being purchased at a lower price than the market usually buys them at? Deal!