The Obama '12 campaign's slogan, for the moment anyway, is "We do big things." It was certainly true in the president's first two years, and looking forward, the next big thing (after we get this pesky budget stuff worked out) may be tax reform. You remember the extraordinary New York Times story about how General Electric, the largest corporation in America, not only pays no taxes on its billions of dollars in profit, but actually got a tax rebate of $3.2 billion in 2010? That's because they employ a small army of lobbyists and accountants who make sure that the corporate tax code is riddled with loopholes, then allow them to exploit every last one.
So now we see the first stirrings of debate about a reform of this system, with the basic outline being that the corporate tax rate would be lowered, and loopholes would be eliminated. While the net revenue collected might not change, the system would be simpler and more efficient, and instead of a division between winners (like G.E.) and losers (companies without hundreds of clever accountants, who pay the statutory rate), there would be a more even playing field.
But if you're G.E. or another big corporation, you like the current system just fine. And you can bet they'll fight like hell to keep things the way they are. That's why this legislative debate, if if takes place, will be one monster of an intra-business throwdown. Democrats may be able to pull some business groups over to the side of reform, but they'll be pitted against other business groups, many of whom are extremely powerful, fighting reform. Jon Chait points out that this split is in itself problematic for Republicans' effort to keep business unified in opposition to the Obama administration's headlong descent into socialism. "So I think the result of this will be Republicans forging a strong alliance with the corporations that would stand to lose the most from a reformed tax code. Democrats can try to expose this strategy and gain support from companies that would win from tax reform. It could create pressure on republicans to go along. But the more likely outcome is that nothing passes."
But there's another possibility, and it goes like this: We get a long, drawn-out debate, with all these different interest groups pulling and pushing members of Congress in different directions. The forces fighting to maintain the loopholes are very strong. The longer it goes, the more the White House becomes committed to getting some kind of a bill, even one that doesn't do everything it wants, so that it can say it accomplished something (beginning to sound familiar?). One by one, existing loopholes get taken off the table during negotiations as the price for Republicans and their corporate allies not blowing up the whole effort. And then in the end, we get tax "reform" that lowers the corporate tax rate but only eliminates a couple of loopholes for cosmetic purposes. It actually ends up reducing revenues, and the big winners are G.E. and other large corporations, who now find it even easier to pay no taxes.
That might not happen. But it certainly seems like something we should be watching out for.