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In a statement released later, Obama said, "Our current corporate tax system is outdated, unfair, and inefficient."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.
ROMNEY INCLUDES STANDARD GOP PROPOSALS
Romney's plan included some standard Republican wish list items, such as reducing the top corporate tax rate to 25 percent, eliminating the inheritance tax and repealing the alternative minimum tax. Romney proposed some limits on tax deductions. He said the popular deductions for home mortgage interest and charitable contributions would continue for most Americans, but "for high-income folks, we're going to cut back on that."
He said he would maintain the current 15 percent rate on capital gains and proposed that no Americans with annual income below $200,000 pay taxes on capital gains.
Obama last week unveiled a $3.8 trillion budget-and-tax proposal that called for aggressive government spending to boost the economy and for higher taxes on the rich.
On Friday, Congress approved extending a payroll tax cut through the end of 2012, when its expiration will coincide with several other fiscal earthquakes: the expirations of individual tax cuts enacted under President George W. Bush, and $1.2 trillion in automatic budget cuts across all government programs imposed as part of last year's deal to raise the debt ceiling.
The confluence of these events could unleash new momentum for comprehensive overhaul of the tax system, but for now proposals along these lines will largely amount to political messaging, analysts said.
One tax break targeted in the Obama plan is the "carried interest" loophole that lets managers of private equity and some other funds pay the 15 percent capital gains tax rate on much of their earnings instead of the 35 percent top income tax rate.
The plan also takes aim at accelerated depreciation, a major tax break enjoyed by many companies, but details were scarce.
EFFECTIVE CORPORATE RATE VARY WILDLY
U.S.-based companies now pay wildly different effective tax rates, with many far below and some well above the 35 percent statutory rate. For example, big multinational companies like General Electric and Boeing are able to shift intellectual property abroad and enjoy low effective tax rates.
Retail companies and healthcare services are among those enjoying fewer tax breaks, so they could benefit from the plan.
Business groups are likely to oppose many elements of the Obama plan, including keeping the current "worldwide" system taxation that taxes profits earned abroad.
Big multinational companies have been lobbying for a tax holiday, known as repatriation, on profits earned abroad, which is missing from the proposal.
A senior administration official said repatriation might be reconsidered as part of the give-and-take when negotiating details with lawmakers in a transition to a new tax system.
Manufacturing is given special status in the plan, including an expanded credit and making permanent a research credit.
[Editor's note: The original headline and summary on this story misstated a comparison of President Obama and former Massachusetts governor Mitt Romney's tax cut plans.]