Obama's Reform on Taxes

Second to Japan, the United States has the second highest corporate tax rate in the world at 35%. Many critics argue that such a high tariff encourages companies to move their businesses overseas, which creates fewer jobs for Americans. On Wednesday February 22, 2012, President Obama released his plan for changing certain aspects to the tax system, which include lowering the corporate rate to 28%, lowering the manufacturing tax rate to an even lower 25%, closing a loophole that lets hedge fund managers and private equity executives pay taxes at lower rates than most working people, and imposing a minimum tax on companies with foreign earnings.

So, is this a good thing for America?

By having a lower corporate tax rate it will assist American businesses to compete with foreign corporations and urge expansion projects amongst companies, which will be preceded by development and job opportunities. However, to every positive aspect there are always negative ones.

For one, the White House is favoring manufactures (by giving them a 25% rate) over service-oriented companies—and who’s to say which one deserves more of a break? Isn’t it true that due to a rapid trend in globalization and technology that our world is becoming more interconnected and that manufacturing jobs in the US are being replaced with cheaper jobs overseas? Shouldn’t the United States move to a more information-technology economy and try to be the leader in such an economy?

This being said, manufactures benefit the middle working class because if manufactures get more of a break, they will be able to expand, and if they augment then they will purchase more and require more workers. In conjunction, manufactures are said to be the key aspects in the economy that spark innovation.

President Obama did not end all tax loopholes, so corporations will still be able to use their attorneys to get away with paying little to no taxes.  But, is it really feasible that the President try to induce total tax reform during an election year and with a split house in the Congress? No. So, for the meantime the American people should be glad that hedge fund and equity executives will be paying more taxes than they normally do. However, if Obama is elected to a second term, I think that he should advocate for ending loopholes for oil companies and for corporations.

Along with this, the President also advocated for a raise in costs for US companies operating overseas—meant to deter businesses from going to other countries and to keep them in America. Although this makes manufactures want to keep business in the US, it shrinks American jobs on world markets—essential for learning and progressing from others.

All and all, I would applaud Obama for lowering the corporate and manufacturing tax bracket, eliminating an important loophole, and raising taxes for those companies overseas, but I think that there is still more work to be done to the tax system.