In the simplest terms possible, it appears that President Obama’s new proposed “grand bargain for middle-class workers” is to use a corporate tax repatriation to pay for a one time boost in infrastructure spending. As best as I can glean from the limited details in his speech and fact sheet, this is the true heart of the proposed bargain.
The politics of this possible deal all depends on the Republicans accepting there is a very important technical difference between a tax increase and a revenue increase. Republicans simply won’t accept tax increases but might accept using a revenue increase to pay for spending.
Currently, for tax reasons many large corporations have their money sitting in offshore accounts. We don’t collect taxes on the money just sitting in those accounts. The assumption is that if we lower taxes on these foreign earnings, the corporations will bring some of back to the United States within the CBO’s 10 year budget window and at least pay some taxes on it.
This can be labeled a “tax cut” because the tax rate would go from one level to a lower level. The CBO would also technically count this as new revenue. Potentially, this would be a pot of money to pay for a “deficit neutral” bill. Obama wants to use some of this money to cut corporate taxes even more to bring Republicans on board and the rest to spend on infrastructure spending to boost the economy. Obama is hoping Republicans could support this deal because, on net, it could be claimed to reduce taxes and reduce the deficit.
It shows what a bind the Republican opposition to all tax increases and Obama’s own rhetorical obsession with the deficit have put him in. He is forced to try to find accounting gimmicks to find “revenue” to spend on projects he supports, even though historically low interest rates make it a great time to just borrow money to spend on needed infrastructure.
All this move does is try to give Republicans plausible permission to sign on if they want. If Republicans want to reject this deal, they will easily find many excuses to do so.