The New Loophole in Obama's Loophole-Closing Plan

A blog about business and economics.
Feb. 22 2012 12:21 PM

The New Loophole in Obama's Loophole-Closing Corporate Income Tax Plan

As I was saying, the problem with the universal consensus around the desirability of closing corporate income tax loopholes is that everyone loves corporate income tax loopholes. For example, the Obama administration's plan to close loopholes and lower rates ends up strongly endorsing the existing and popular R&D tax credit, strongly embracing the newly controversial clean energy tax credit, and dreaming up a plan to expand deductions for domestic manufacturing:

Effectively cut the top corporate tax rate on manufacturing income to 25 percent and to an even lower rate for income from advanced manufacturing activities by reforming the domestic production activities deduction. Reflecting manufacturing’s key role in innovation and the intense international competition facing the sector, the president’s Framework would reform the current domestic production activities deduction. It would focus the deduction more on manufacturing activity, expand the deduction to 10.7 percent, and increase it even more for advanced manufacturing. This would effectively cut the top corporate tax rate for manufacturing income to 25 percent and even lower for advanced manufacturing.
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This proposal comes after a bunch of text about how awesome manufacturing is. And manufacturing is pretty awesome. But is it more awesome than software? More awesome than curing disease? I dunno.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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