"ANALYSIS: House GOP ‘Jobs Plan’ Would Give Billions In Budget Busting Tax Breaks To Huge Corporations"
Our guest blogger is Ethan Berman, Economic Policy Intern at the Center for American Progress Action Fund.
There is one consensus among all lawmakers as they push to bring back the jobs lost over the last few years and lower the unemployment rate: small businesses are the key. But Republican leaders are manifesting their desire to help small businesses by pushing for an extension of the Bush tax cuts for the rich (which will help less than two percent of small businesses) while simultaneously filibustering a bill providing tax credits to actual small businesses
But House Republicans have also proposed the Economic Freedom Act of 2010, a plan that embodies the same conservative economic policies that failed over the last decade. Introduced by Rep. Jim Jordan (R-OH) and Rep. Jason Chaffetz (R-UT) and supported by the House Republican Study Committee, it seeks to create new jobs through a number of huge tax breaks for wealthy individuals and corporations. Speaking on the House floor on April 22nd, Rep. Tom Rooney (R-FL) boldly stated:
Americans who have been jobless for over a year will continue down that road if new jobs simply do not exist. And I am not talking about temporary government jobs. Congress must work to stop spending and create a favorable environment for businesses to save money and invest by cutting taxes…This is why today I cosponsored the Economic Freedom Act.
How will the Freedom Act create jobs? It won’t. But among other things it will lower the corporate income tax from 35 percent to 12.5 percent, which as a new report from the Center for American Progress Action Fund and Citizens for Tax Justice shows, will give gigantic tax breaks to large corporations such as:
Not only does this plan lower corporate tax revenue in a system already full of loopholes and tax credits, it is also extremely inefficient in creating economic activity. According to Moody’s Economy.com, a corporate tax cut only generates 30 cents of economic activity for every dollar spent. In contrast, the unemployment benefits extension that the Republicans filibustered earlier this year will result in $1.61 of economic activity for every dollar spent.
No one is arguing that this tax cut wouldn’t generate any economic activity or give companies less incentive to hide profits offshore, but rather that the negative consequences outweigh the positive by a vast amount. This tax break is estimated to add $2.7 trillion to the deficit relative to current law.
President Obama’s American Recovery and Reinvestment Act has saved or created about three million jobs since its enactment according to the Congressional Budget Office. In addition, it has provided tax cuts to more than 95 percent of American households. On the other hand, the Economic Freedom Act will not only cost the country trillions of dollars, but will also send the overwhelming majority of its tax breaks to a minority of individuals and large corporations, when we want money flowing into the hands of the people who are most likely to spend or invest it to create jobs.
To read more about the Republican “jobs plan” and its economic consequences, check out Republicans’ $10 Trillion Giveaway.