Republicans have found yet another way to scam their own voters. Greg Sargent

Republicans have found yet another way to scam their own voters. Greg Sargent

Opinion by 

Greg Sargent

Columnist

April 12, 2021 at 11:45 p.m. GMT+9

Washington Post 

Senate Minority Leader Mitch McConnell. (Timothy D. Easley/AP)

“Small-business job creators.”

Get ready to hear that phrase a lot in the coming months, as Republicans gear up to attack the proposed corporate tax hikes that would fund President Biden’s new jobs plan.

Sen. Roger Wicker used that phrase twice in the space of several sentences on ABC News’s “This Week.” The Mississippi Republican claimed Biden’s plan would impose a “massive tax increase on small-business job creators,” to fund “massive social welfare spending.”

That echoes the widespread GOP claim that much of Biden’s plan doesn’t count as “real” infrastructure. So the GOP attack is that the plan hurts virtuous small-business owners to fund airy liberal social engineering (health care, research and development) rather than salt-of-the-earth roads and bridges.

Story continues below advertisement

But with this dual talking point, Republicans have found another way to scam their own voters, in ways that arguably cut against their economic interests.

You can see this from a new White House report that tallies up the infrastructure needs of each state. It concludes that red states also have serious physical infrastructure needs.

Here’s what the report finds: Of all the states with two GOP senators, at least 15 have hundreds of bridges and at least a thousand miles of highway in poor condition. This makes commuting and moving goods less efficient and often boosts car repair costs by hundreds of dollars per year.

This is based on Department of Transportation data, but importantly, other findings are based on outside information. The report cites the latest American Society of Civil Engineers infrastructure evaluation, which concludes that at least 15 of those red states have a grade of “C” or worse.

Republicans will likely oppose everything

The point here is not that blue states (which also have poor grades) fare better. It’s that red states have a serious need for upgrades, too.

Story continues below advertisement

Many Republicans do acknowledge the need for such upgrades, and say they’d support a plan that spends only on “real” infrastructure. But their goal is to sink the entire Biden plan. They will likely oppose even a separate measure that includes only “real” infrastructure spending.

After all, Republicans have already ruled out tax hikes to fund this spending, and it’s unlikely they’ll fund it with deficit spending, since they want to run in 2022 on the idea that deficits exploded on Biden’s watch.

So what will they support in the end? Probably nothing. At best only a few GOP senators will back even a skinny bill focused only on “real” infrastructure.

Story continues below advertisement

Which brings us to this “small-business job creators” talking point.

‘Small-business job creators’

On taxes, the two biggest elements in Biden’s plan would raise the corporate tax rate from 21 percent to 28 percent, and make various changes to tax law to make it harder for multinational corporations to avoid taxes by sheltering revenue offshore.

Neither of these would seriously impact what Republicans call “small-business job creators,” according to Steven Rosenthal, a senior fellow at the nonpartisan Tax Policy Center.

“By definition, raising the corporate tax rate and creating a more robust minimum tax for foreign profits would not reach small businesses,” Rosenthal told me.

Story continues below advertisement

While you can debate what constitutes a “small business,” Rosenthal noted, most of what we’d reasonably call small businesses don’t have any incentive (like public trading of shares) to adopt a corporate structure that subjects them to corporate taxes.

It’s true that some smaller organizations adopt various business structures such as limited liability partnerships. But those are not subject to corporate taxation (taxes on profits are levied directly on owners), and are often big and/or are owned by wealthy individuals, Rosenthal said.

Even more to the point, proposals to recoup multinational revenue from offshore are targeted by definition at large corporations, not small businesses, Rosenthal noted.

Story continues below advertisement

These proposals would close loopholes in the minimum tax on certain types of income earned abroad — ones created by the 2017 GOP tax cut — by raising that minimum tax and tightening how it’s applied, to deincentivize more tax avoidance via international profit shifting.

Rosenthal said applying the “small business” label to such companies is ludicrous. “How could a small business ever have foreign profits from abroad?” Rosenthal asked.

This points to an even deeper GOP scam at play here.

A deeper GOP scam

Republicans have also been claiming the Biden tax proposals would make the U.S. less competitive relative to lower-tax countries (resulting in capital invested elsewhere) and would discourage job-creating corporate investment at home.

Story continues below advertisement

But as a wonky Paul Krugman analysis points out, this is highly unlikely. First, the main lure for multinationals is not investing capital elsewhere, but merely “accounting tricks” to park profits in tax havens for the purpose of tax avoidance, which Biden’s plan would address.

What’s more, as Krugman notes, much of the profits subject to higher corporate tax rates would be ones generated by market power, something that’s especially true of Big Tech companies. Because those profits are generated above and beyond what capital investment itself generated — they’re a product of monopolistic positioning — such a tax won’t deter such investment.

What we’re left with is this. The “small-business job creator” line is supposed to take an old GOP talking point (about taxes hurting heroic job creators) that has taken on “masters of the universe” connotations and give it a sheen of heartland-ish, producerist virtue.

Story continues below advertisement

But when Republicans vote against these proposals, they’ll be protecting multinationals’ ability to evade taxes with offshore accounting trickery and shielding corporations from paying higher taxes on monopoly profits, including those of the “woke Big Tech” they’ve been attacking lately. That this will come at a cost to infrastructure in red states only makes the scam worse.

Read more:

.