The Wall Street Journal nicely summarizes Barack Obama’s “grand bargain”:

In Chattanooga on Tuesday, the latest stop on his economic inequality tour, President Obama made himself an offer he couldn’t refuse. If Congressional Republicans agree to a corporate tax increase, he said, then he’ll agree to spend more money on his favorite public-works projects. If Republicans bargain hard, will he also offer an expansion of ObamaCare as a sweetener?

We know this sounds like an exaggeration, but that’s the essence of what the President proposed as what he called a new “grand bargain.” Mr. Obama will agree to reform the corporate tax code—a GOP priority and one even the President claims to support—but only if the reform raises more revenue and only if he is allowed to spend that windfall on his priorities.

A White House press release clarified that the President would also like to raise taxes on individuals, not just businesses, while allowing federal spending to rise still higher. But showing they retain a sense of humor in the West Wing, the press release suggests that the President is willing to forgo this tax increase for now because he wants to “work with Republicans.”

This isn’t a serious proposal, and he knows it. It also isn’t bipartisan, since he is offering a compromise with appeal to the ideological spectrum running from Elizabeth Warren to Chuck Schumer. …

The real bipartisan reform opportunity would be to get behind the chief Senate and House tax writers, Democrat Max Baucus and Republican Dave Camp. They’ve been holding hearings on tax reform for years, and Mr. Baucus has even invited all Senators to send him a list of tax provisions they’d like to retain and why.

The rub for Mr. Obama is that both men conceive of using whatever money they would raise from closing loopholes to reduce tax rates. This is crucial to getting rates as low as possible, especially given that the statutory U.S. corporate rate of 35% (plus state corporate taxes) is the highest in the developed world.

But it is also crucial to making reform politically possible. A reform that merely lowers rates a few percentage points has no chance of building enough support to overcome the opposition of companies and interests that will see their tax loopholes closed.

The problem, as ever, is that Mr. Obama simply can’t get over his ideological fixation to keep tax rates as high as possible. We say “ideological” because his own advisers concede that a 35% rate hurts U.S. business competitiveness. Even Japan, the last high-rate holdout among rich countries, is cutting its corporate rate. But recall the famous moment in the 2008 campaign when then Senator Obama was asked by ABC’s Charlie Gibson if he would support higher capital gains tax rates even if they raised less revenue than lower rates. Mr. Obama said yes. …

Even for businesses that might find the proposal intriguing, the simplification in Mr. Obama’s plan seems to apply mainly to those that file under the corporate tax system. Most small business owners file under the rules for individuals, which are not being simplified under this plan and whose tax rates Mr. Obama raised substantially in January. Cutting corporate rates without doing so for small businesses will merely increase the opportunities for tax arbitrage.

On the other side of Mr. Obama’s grand bargain, he offered his usual grab bag of spending that would create more union jobs at high Davis-Bacon wages, more teachers, and more job training, though the federal government already runs more than 40 job-training programs that don’t seem to do much training for real jobs. He also wants more subsidies for biofuels and electric cars—the ideas that worked so well in the first term.

The Weekly Standard also observes:

The New York Times reports that President Obama is reviving an old proposal to lower the corporate tax rate from 35 percent to 28 percent (and 25 percent for manufacturers). Obama’s push to lower the corporate tax rate to 28 percent comes less than a year after he raised the top individual income tax rate, paid by many small businesses, to 39.6 percent.

In a speech delivered Tuesday afternoon, Obama did not explain why he thinks it’s a sound economic idea to raise the top marginal tax rate on small businesses but lower it for corporations. …

“Many small businesses” pay the top income tax bracket because they are organized as subchapter-S corporations, whose taxes flow through to their owners. According to S-Corp, subchapter-S corporations employ one of four Americans. So Obama is perfectly fine with 40-percent tax rates (as of Jan. 1, when the George W. Bush tax cuts ended) on the employers of one in four Americans.

S-Corp is not thrilled with Obama’s proposal:

 In effect, the President’s plan calls for raising taxes on pass-through businesses in order to cut them for larger C corporations.

How much?  Our 2011 study from Ernst & Young showed that pass-through businesses will see their tax burden rise by 8 percent ($27 billion) per year under budget neutral, corporate-only tax reform.  Industries most affected by the tax hike are agriculture (22 percent), construction (9 percent), retailers (9 percent), manufacturing (8 percent), and real estate (8 percent). This same study made clear that pass-through businesses employ the majority of private sector workers in the US.

So the President is proposing to hike taxes on the majority of employers in order to cut them for a smaller segment of C corporations.

Moreover, these estimates came before the recent rate hikes on pass-through businesses, so the total impact of the President’s proposal today should be higher.  To the extent the President wants to raise revenue, that too would increase the hit to pass through businesses.

The Washington Post adds, and I assume this is not fiction:

The White House can’t be expecting the House GOP to suddenly cave. They’re trying to do a couple of things. First, expand the idea of a “grand bargain” to mean not just deficit reform but any sort of economic agreement, and challenge Republicans to come up with a counteroffer. Second, try to win support from the business community for a proposal that contains two things they want: tax reform and domestic investments.

Most of all, Obama is simply making clear that tax reform is one of his priorities, as Ronald Reagan did in his second term. “Tax reform is a drama with heroes and villains and a damsel in distress,” Reagan said in 1985, in a speech given in — wouldn’t you know it — Tennessee.

Reagan’s definition of “tax reform” resulted in two personal income tax brackets: 15 percent and 28 percent. (That lasted as long as George H.W. Bush’s tax increase, which resulted in Bush’s presidential election loss.) Obama’s definition of “tax reform” isn’t Reagan’s, nor is it any Republican’s definition. For that matter, it isn’t Bill Clinton’s definition either; he at least cut capital gains taxes with cooperation from Republicans.

The fact that Obama’s “grand bargain” isn’t going to happen doesn’t mean tax reform isn’t necessary. Tax reform that results in lower rates and a smaller bite of our money is necessary. Present tax rates are a major reason for Obama’s flaccid economy, as Investors Business Daily points out:

The fiscal cliff deal he signed at the start of the year hiked taxes a total of $620 billion over the next decade. And ObamaCare added another $1 trillion in new taxes.

Worse, 13 of these took effect in January, according to an analysis by the Heritage Foundation, with many of them hitting businesses and investments.

Among them:

• The top marginal tax rate climbed from 35% to 39.6% on incomes over $450,000. These same taxpayers saw rates on dividends and capital gains go from 15% last year to 20%.
• Personal exemptions and itemized deductions are now phased out on incomes over $300,000. And the full expensing of business investments expired at the start of the year.
• ObamaCare added a 3.8% surtax on investment income for those earning more than $250,000, and a Medicare surtax of 0.9% on incomes above that amount.
• In addition, there’s the 2.3% excise tax on medical devices, and cuts to two corporate tax deductions related to health benefits.

With so many anti-growth taxes all hitting at once, it’s hardly surprising that growth has slowed. The only mystery is why no one is talking about it.