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Title: Obama's Corporate Tax Plan Would Slash Rates, Breaks
Source:
USA TODAY
URL Source: [None]
Published: Feb 22, 2012
Author: USA TODAY
Post Date: 2012-02-22 15:12:17 by Brian S
Keywords: None
Views: 1131
Comments: 1
President Obama's long-awaited business tax plan would lower the corporate tax rate from 35% to 28% while slashing popular tax breaks enjoyed from Wall Street to Main Street, making it unlikely to get far in Congress in this election year. The plan would make up lost revenue as a result of lower rates by eliminating popular tax loopholes and simplifying a business tax system that an administration statement called "uncompetitive, 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," Obama said in a prepared statement. "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." Among the endangered loopholes from what the Obama administration calls a "menu of options" is the current accelerated depreciation schedule that encourages business investment. "It comes at the cost of higher tax rates for a given amount of revenue," the plan states. The goal of the plan is to reduce the effective corporate tax rate in the U.S. to the average of those in major industrialized nations, thereby making U.S. companies more competitive. To get there, the plan proposes to eliminate all tax breaks for specific industries, with few exceptions deemed "critical to broader growth or fairness." Preference was retained for three types of breaks: for manufacturing, research, and clean energy. "We want to restore a system in which American businesses succeed or fail based on the products they make and the services they provide, not on the creativity of their tax engineers or the lobbyists they hire," Treasury Secretary Timothy Geithner said in unveiling the plan to reporters Wednesday. "By getting rid of special preferences for special types of activity and specific industries, we can reduce distortions that hurt productivity and economic growth, permitting us to lower corporate tax rates in a fiscally responsible way," Geithner said. The Obama plan would retain and make permanent one popular break: the tax credit for research and experimentation. But it would require that any corporate tax breaks retained by Congress be paid for. Currently, those breaks add about $25 billion a year to the deficit. The plan calls for lowering the tax on manufacturing to 25%, even lower for "advanced" manufacturing activities. It would require companies to pay a minimum tax on overseas profits. And it would allow small businesses to expense up to $1 million in investments. Some Republicans denounced the proposed corporate tax cut as nothing more than an election-year ploy. "Time and again, President Obama shows us his every move is determined by his re-election campaign and has nothing to do with principle," said Kirsten Kukowski, spokeswoman for the Republican National Committee. "How else can you explain his sudden desire to talk corporate taxes after three years of failed economic policies?" Manufacturers applauded the goal but not the specifics. "The president suggests some changes that will help, but many of the proposals completely miss the mark and would make U.S. businesses less competitive," said Jay Timmons, president of the National Association of Manufacturers. "In addition, the two-thirds of manufacturers who file as individuals will receive no relief from the current burdensome tax system." The Treasury Department has been working on corporate tax reform for two years, and the decision to roll it out now -- but with Geithner, not Obama, doing the talking -- indicates a desire to take on a difficult issue without being overly specific. Geithner acknowledged that the corporate tax code may have to wait for overall tax reform, including individuals, but said that would take much longer to negotiate with Congress. The last time the tax code was overhauled was in 1986 -- "before the Internet," he said. Very few tax loopholes were singled out for elimination, including some Obama has cited before, such as tax breaks for oil and gas companies, hedge fund managers and owners of corporate aircraft. More expensive and widely used tax breaks, such as accelerated depreciation and reducing the deductibility of interest for corporations, are mentioned only as options. However, the plan notes several of the costlier breaks would have to be wiped out to get the rate down to 28% without raising the deficit. "The president's proposal is designed to start the process," Geithner said. "This process is going to take time. It will be politically contentious. Some are going to say these proposals are too tough on business, and others will say they're not tough enough." Not tough enough, said the liberal Campaign for America's Future, which noted that lobbyists work to restore tax breaks or get new ones after reforms are made. "The entire proposition of lowering rates in exchange for closing loopholes is, as we learned with the Reagan tax reforms, something of a put-on," said co-director Robert Borosage. "The loopholes are closed, but the corporate lobbies stay in place. In time, the rates have come down, but the loopholes have returned." Officials said they didn't go further -- say, to 25%, as Republican presidential candidate Mitt Romney has proposed -- because they could not save enough in loopholes to pay for it within the corporate tax system. Newt Gingrich has proposed a 12.5% rate. Rick Santorum wants to exempt domestic manufacturers and cut the top rate in half for others. 1. Eliminate dozens of tax loopholes and subsidies, broaden the base and cut the corporate tax rate to spur growth in America: The framework eliminates dozens of different tax expenditures and fundamentally reforms the business tax base to reduce distortions that hurt productivity and growth. It reinvests these savings to lower the corporate tax rate to 28 percent, putting the United States in line with major competitor countries and encouraging greater investment. 2. Strengthen American manufacturing and innovation: The framework would refocus the manufacturing deduction and use the savings to reduce the effective rate on manufacturing to no more than 25 percent, while encouraging greater research and development and the production of clean energy. 3. Strengthen the international tax system, including establishing a new minimum tax on foreign earnings, to encourage domestic investment: 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. 4. Simplify and cut taxes for America's small businesses: Tax reform should make tax filing simpler for small businesses and entrepreneurs so that they can focus on growing their businesses rather than filling out tax returns. 5. Restore fiscal responsibility and not add a dime to the deficit: Business tax reform should be fully paid for and lead to greater fiscal responsibility than our current business tax system by either eliminating or making permanent and fully paying for temporary tax provisions now in the tax code.
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#1. To: Brian S (#0)
Canada's corporate tax rate is 16.5% Once Obama proposes something like that, I'll be impressed. Otherwise, forget it.
President Obama's long-awaited business tax plan would lower the corporate tax rate from 35% to 28%
Iran’s main drive for acquiring atomic weapons is not for use against Israel but as a deterrent against U.S. intervention -- Major General Zeevi Farkash, head of the Israeli Military Intelligence Directorate
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