By launching his economic program with a plan to cut corporate taxes, Democratic presidential candidate John Kerry aims to steal one of President Bush’s favorite themes while keeping attention focused on the hot-button issue of offshoring U.S. jobs.
Kerry, the presumed Democratic nominee, laid down the first plank of an economic platform Friday that he said would create 10 million jobs in four years — in sharp contrast to the 2.2 million jobs that have been lost since Bush took office.
“America cannot afford four more years of a president who is the first to lose jobs since Herbert Hoover in the Great Depression,” Kerry said at a rally in Detroit where he unveiled a sweeping plan to restructure corporate taxes. The plan would eliminate a feature of the tax code that offers favored treatment for large multinationals that expand overseas, allowing their overseas profits to be taxed at foreign rates that are typically far lower than U.S. levels.
While the plan already faces opposition from powerful business lobbying groups, Kerry deftly aimed to undermine his critics by tying the plan to a 5 percent reduction in the corporate tax — from 35 percent to 33.25 percent.
John Zogby, an independent political pollster, called it a “brilliant political stroke.”
“(It) kind of steals thunder from the Bush administration by portraying Kerry as a tax-cutter, albeit a fairer tax cutter, and with the prospect of jobs at the end of the road,” Zogby said. “It makes it very difficult for Bush to attack this.”
By proposing a cut in corporate taxes — as well as a tax “holiday” to encourage businesses to repatriate profits — Kerry is plucking a page from the politically centrist playbook that propelled President Clinton to two terms in office, Zogby said.
“This is the sort of thing that works in this kind of climate when things are so intensely partisan,” he said.
Indeed, in a conference call with reporters after Kerry’s speech, former Clinton adviser Roger Altman noted: “It’s quite remarkable for a Democrat to be proposing a reduction in corporate tax rates.”
Altman, a senior economic advisor to the Kerry campaign, said Friday’s speech was the first of at least three laying out the central planks of a program to restore economic competitiveness and create jobs. He said the promise of 10 million jobs over four years was reasonable, noting that the economy created more than 11.5 million jobs in the first four years of the Clinton administration.
“The overall thrust of Sen. Kerry’s whole economic policy is to make American employers more competitive,” Altman said. “He is going to do that by lowering their cost of doing business.”
By closing the loophole that allows companies to avoid paying taxes on profits earned overseas, the Kerry campaign estimates the government would raise about $12 billion in revenue annually, which would be funneled back to corporate tax-payers through the rate cut. More than 99 percent of tax-paying companies would see savings, according to Kerry officials.
A two-year "tax holiday" that would allow companies to repatriate foreign profits at a reduced tax rate of 10 percent would raise another $22 billion, which would be used to fund a temporary tax credit for job creation.
The 10 million new payroll jobs would be created as the unemployment rate declines from its current 5.6 percent to 4.1 percent by January 2009, according to an analysis done for the campaign by Harvard economist Lawrence Katz.
The economy has emerged as the No. 1 issue in this year’s presidential campaign and one of President Bush’s biggest areas of vulnerability. Although the economy grew rapidly in the last half of 2003, employers have added only 60,000 jobs a month on average over the past six months, far short of the usual pace in the third year of an expansion.
A recent CBS News/New York Times poll found that 31 percent of voters surveyed said “jobs and the economy” was the single issue they would most like candidates to discuss in the campaign, followed by 11 percent who cited the war in Iraq and 10 percent who said health care.
President Bush Friday focused on housing and immigration reform in appearances that targeted Hispanic voters in New Mexico and Arizona. “We want more people owning their own home in America,” Bush said, crediting his $1.7 trillion in tax cuts with helping to drive the national homeownership rate to a record level of over 68 percent.
Despite the decline in jobs over the past three years, the housing sector has turned in three straight years of record sales, and with mortgage rates once again approaching historic lows the market shows little sign of cooling.
Greg Valliere, chief strategist for Schwab Washington Research Group, said Kerry’s proposal could widen a rift between companies that have extensive operations overseas and those who primarily operate domestically.
“I think this is very, very clever politically,” he said. “It plays well in the battleground states — Ohio, Illinois, Michigan, Pennsylvania. He now really has a leg up on Bush on the whole issue of outsourcing.”
At the same time, Kerry can begin to claim the mantle of tax-cutter, defending himself against Bush campaign ads that portray him as a supporter of raising taxes in his 19 years as senator from Massachusetts.
The U.S. Chamber of Commerce, which lobbies for business interests, said Kerry's plan would undermine U.S. growth and result in job loss.
"Pitting U.S. companies against each other is not wise economic policy," said Chamber executive vice president Bruce Josten. "And raising the top individual tax bracket across the board — which will hurt millions of small businesses that create most of the new jobs in America — to pay for a targeted tax cut will interrupt our economic recovery."
Kerry has proposed rolling back that portion of Bush tax cuts that has lowered individual rates for taxpayers earning more than $200,000 a year. The chamber said that would affect many small businesses, which typically pay individual tax rates.