Tax-cut duel: After Romney, Obama lays out his plan
President Obama unveiled a plan to cut corporate tax rates to 28 percent – almost as much as a Mitt Romney proposal today. Did Obama just remove tax cuts from the GOP campaign arsenal?
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Though it has little chance of becoming law in an election year with Congress deeply divided on fiscal issues, Obama's plan aligns him roughly with the Republican presidential challengers and could minimize the corporate tax rate as a political issue.
The president proposed cutting the top corporate rate to 28 percent from 35 percent, addressing a long-standing gripe by U.S. corporations that the rate is too high.
Republican hopeful Mitt Romney on Wednesday unveiled proposals of his own calling for capping the individual income tax rate at 28 percent, down from 35 percent, and slashing the corporate rate to 25 percent, among other steps.
Though thanks to tax breaks many companies pay nowhere near the top U.S. corporate rate of 35 percent, the statutory top U.S. rate makes it the world's second-highest after Japan's.
In return for lowering the tax rate on businesses, Obama's plan calls for broadening the corporate tax base by ending a number of tax breaks, some spelled out earlier in his budgets.
The plan tries to reverse tax incentives for corporations to relocate jobs and research overseas, while giving domestic manufacturing operations bigger tax breaks.
In a new twist targeting companies that stash profits abroad to avoid paying U.S. taxes, the president proposes slapping a minimum tax on corporate profits earned in low-tax countries, though his plan did not spell out a rate.
CORPORATIONS WANT MORE
Obama's plan was immediately criticized as inadequate by some business groups, while others said the plan was a step in the right direction, but short on details.
In a move that critics said was made partly to counter the unveiling of Romney's plan, Obama's proposal was rolled out at a briefing by Treasury Secretary Timothy Geithner.
In a statement released later, Obama said, "Our current corporate tax system is outdated, unfair, and inefficient."
"It provides tax breaks for moving jobs and profits overseas and hits companies that choose to stay in America with one of the highest tax rates in the world.
"It is unnecessarily complicated and forces America's small businesses to spend countless hours and dollars filing their taxes. It's not right, and it needs to change."
The last major rewrite of the tax code came in 1986 under Republican President Ronald Reagan, who raised corporate taxes.
Since then, the U.S. tax code has become riddled with deductions, exemptions and loopholes, each one defended by interest groups in Washington with hefty lobbying budgets.
Complicating any tax reform effort are the approaching congressional and presidential elections in November, as well as deep divisions in Congress that have prevented lawmakers from dealing effectively with tax and budget issues for many months.
Analyst Greg Valliere of Potomac Research Group called the timing of the release of the Obama plan a "cynical ploy" because of the release of Romney's plan. The Obama plan "has virtually no chance of winning enactment this year," Valliere said.
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Making a Difference