Obama administration to unveil corporate tax reform plan to lower top rate to 28 percent, lose loopholes
Published February 22, 2012
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Feb. 16, 2012: Treasury Secretary Timothy Geithner testifies on Capitol Hill in Washington.
The Obama administration plans to unveil a long-awaited corporate tax reform plan on Wednesday, lowering the top income- tax rate for corporations to 28 percent from 35 percent while eliminating deductions.
Corporations with overseas operations would also face a minimum tax on their foreign earnings, new tax benefits would be given to incentivize U.S. manufacturers while taxes on oil and gas companies would reportedly see their taxes go up while losing many large deductions and subsidies.
The plan aims to raise $250 billion over 10 years.
"Our tax system should not give companies an incentive to locate production overseas or engage in accounting games to shift profits abroad, eroding the U.S. tax base. Introducing the principle of a minimum tax on foreign earnings would help address these problems and discourage a global race to the bottom in tax rates," reads an outline provided by a senior administration official
The outline says the manufacturing deduction -- emphasizing clean energy research and development -- would reduce the effective rate on manufacturing to no more than 25 percent.
Senior administration officials told Fox News the announcement, to be held at the Treasury Department, fills in details of the tax reform outline Obama gave during his State of the Union address.
The president said at the time he wants to lower the overall corporate tax rate "for the first time in 25 years." The U.S. corporate rate of 35 percent is one of the highest in the world.
The White House is calling for more "fairness" and "simplicity" in the system, and in a bid to move companies back to the U.S., it would seek a minimum tax on global profits. Currently, many corporations do not invest overseas profits in the United States to avoid the 35 percent tax rate.
Treasury Secretary Timothy Geithner told a House committee last week that the administration wants to create more incentives for corporations to invest in the United States. While the rate itself may be among the highest in the world. Geithner argued that the effective rate is much lower because of all the loopholes in the system.
"We want to bring down the rate, and we think we can, to a level that's closer to the average of that of our major competitors," Geithner told the House Ways and Means Committee.
During his State of the Union address, Obama pitched the tax reform as a way to "knock down barriers that stand in the way" of economic success.
He described the tax code as the product of a "parade of lobbyists" rigging the system.
"Those with accountants or lawyers to work the system can end up paying no taxes at all. But all the rest are hit with one of the highest corporate tax rates in the world. It makes no sense, and it has to change," Obama said in January. He urged Congress to "simplify" the system, get rid of loopholes and use the savings to lower the corporate rate.
The president's plan will be unveiled by Treasury Department officials, though administration officials insisted the president is behind the plan and that the Treasury Department is merely filling in the details.
Many members of both parties have said they favor overhauling the nation's individual and corporate tax systems, which they complain have rates that are too high and are riddled with too many deductions.
The corporate tax debate has also become an element of presidential politics. Republican presidential candidate Mitt Romney has called for a 25 percent rate while former House Speaker Newt Gingrich has said he would cut the corporate tax rate to 12.5 percent, and Rick Santorum, called for exempting domestic manufacturers from the corporate tax and halve the top rate for other businesses.
Fox News' Ed Henry and The Associated Press and The Wall Street Journal contributed to thi
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