Obama to propose corporate tax rate cut

President Obama

WASHINGTON - Laying down an election-year marker in the debate over taxes, the Obama administration is proposing to cut the corporate tax rate from 35 percent to 28 percent, and to seek an even lower effective rate for manufacturers, a senior administration official says.

In turn, corporations would have to give up dozens of loopholes and subsidies that they now enjoy. Corporations with overseas operations would also face a minimum tax on their foreign earnings.

Treasury Secretary Timothy Geithner on Wednesday was to detail aspects of President Barack Obama's proposed overhaul of the corporate tax system, a plan Obama broadly outlined in his State of the Union speech last month.

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Chances of accomplishing such change in the tax system are slim in a year dominated mostly with presidential and congressional elections. But for Obama, the proposal is part of a larger tax plan that is central to his re-election strategy.

The corporate tax plan dovetails with Obama's call for raising taxes on millionaires and maintaining current rates on individuals making $200,000 or less.

The 35 percent nominal corporate tax rate is the highest in the world after Japan. But deductions, credits and exemptions allow many corporations to pay taxes at a much lower rate.

Under the framework proposed by the administration, the rate cuts, closed loopholes and the minimum tax on overseas earning would result in no increase to the deficit.

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That means that many businesses that slip through loopholes or enjoy subsidies and pay an effective tax rate that is substantially less than the 35 percent corporate tax could end up paying more under Obama's plan. Others, however, would pay less while some would simply benefit from a more simplified system.

The official said the Obama plan aims to help U.S. businesses, especially manufacturers who face strong international competition. Obama's plan would lower the effective rate for manufacturers to 25 percent while emphasizing development of clean energy systems. The administration official spoke on condition of anonymity to describe what the administration will do.

The New York Times first reported details of the plan in its online edition early Wednesday.

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 made its way into the presidential contest. Former Massachusetts Gov. Mitt Romney has called for a 25 percent rate, former House Speaker Newt Gingrich, R-Ga., would cut the corporate tax rate to 12.5 percent, and former Sen. Rick Santorum, R-Pa., would exempt domestic manufacturers from the corporate tax and halve the top rate for other businesses.

While Obama has been promoting various aspects of his economic agenda in personal appearances and speeches, the decision to leave the corporate tax plan to the Treasury Department to unveil signaled its lower priority.

What's more, the administration's framework leaves much for Congress to decide -- a deliberate move by the administration to encourage negotiations but which also doesn't subject the plan to detailed scrutiny.

Obama's plan is not as ambitious as a House Republican proposal that would lower the corporate rate to 25 percent.

Still, Obama has said corporate tax rates are too high and has proposed eliminating tax breaks for American companies that move jobs and profits overseas. He also has proposed giving tax breaks to U.S. manufacturers, to firms that return jobs to this country and to companies that relocate to some communities that have lost big employers.

Geithner told a House committee last week that the administration wants to create more incentives for corporations to invest in the United States.

"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.

White House economic adviser Gene Sperling has advocated 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.

[Osprey4]

Just amazing how simple minded most of these comments are. The headline says TAX CUT, so they immediately hit the comment button without ever reading that silly fine print known as the ARTICLE.

This is a tax increase on US companies, plain and simple. The administration wants to tax foreign earnings. American companies will continue to pay the HIGHEST COMBINED CORPORATE TAXES IN THE WORLD. Foreign companies will not have to pay more, so they will have a competitive advantage.

[sirmarion-2009]

What a sham,he wants to cut corporate taxes then go after all the money they make overseas,and tax it as well? How many companies do you think Obama can force to move completely out of America? He sure is trying.

[Osprey4]

Essentially, he is punishing US businesses for earning money outside the US. Meanwhile, foreign companies will pay no such penalty.

Buh bye, jobs!

[sjc_1]

You don't get it at all, companies like GE are American companies and they keep money outside to avoid taxes, this will allow them to bring the money back in at a LOWER rate.

[js2212]

This forum is a testament to the limited ability most people have to properly understand the things they read. Everyone is screaming about how awful this proposed tax "cut is. You idiots, he's proposing to lower the nominal rate and eliminate loopholes, thereby increasing the effective rate they pay.

I do not like Obama and will never vote for him, but honestly people, you need to brush up on your reading comprehension. Personally, I think any increase in what corporations pay will be passed on to the consumer. It's not evil it's just business. And there's nothing you can do about it.

[Osprey4]

Well said. People see "tax cut" and just assume it's a "give-away to rich corporations", when in fact it will actually increase effective rates.

[prodius]

Actually Obama's proposed plan raises dividend taxes.

everyone knows that dividends are paid after the 35% corporate tax and then taxed 15%.

Under Obama's plan corporate taxes will drop to 28% and dividends will increase to 44.8% but it seems CBS has omitted that "little" detail.

The WSJ and even RCP has articles on just what is lowered and what is increased.

It's apparent the "loophole" Obama is refering too is dividend taxes.

[stephand]

Best thing he has proposed since he became president! I guess Paul Ryan had a good idea after all... Isn't it funny how things change in an election year? Evil corporations now deserve a tax cut.

[js2212]

step, brush up on your reading comprehension. There is a cut to the nominal rate but elimination of loopholes that allow corporations to lower that nominal rate. Meaning that essentially they will now pay more taxes, not less.

Evil corporations provide nearly every single comfort you now enjoy. Does that make them more evil or less evil.

[stephand]

That is exactly what Paul Ryan proposed... I believe the article states it breaks about even - not more (or less) taxes. It just treats everybody the same. No more breaks for oil companies OR green jobs.

[tsigili]

An idea stolen from the GOP.

This guy has NEVER had an original idea of ow to do ANYTHING!

[prodius]

The GOP never sought too raise Dividned taxes from 15% to 44.8% like Obama's plan.

[jtdev1]

We're going to tax cut our way out of this debt.

Yup, that's how to do it. Tax Cuts for all but the middle class.

[Osprey4]

It's NOT a tax cut. READ THE ARTICLE!

[fedup12]

The worst of every world. Now he is even more like GOP. SPEND HUGE, CUT THE TAXES and watch the debt grow...

[sirmarion-2009]

You need to look a little deeper.

[RobAla]

Republicans have been proposing this for some time. I'm glad to see that President Obama is beginning to realize that cutting taxes on business helps create jobs. If he had agreed to this some time ago, the unemployment in the US would have come back at a much stronger rate. I am sure that President Obama realizes that any unemployment rate above 8% makes it difficult for him to win a second term.

Now, if he can only understand that his oppressive and idiotic health care law (which imposes huge additional regulations and expenses on business) needs to be repealed, then we would really see a difference in bringing jobs back. However, lowering the tax rates on businesses is a good start. Too bad it takes the thoughts of not having a second term to push President Obama in this direction. I wish he actually understood that his desire to "fundamentally transform" the US from a democratic republic into a socialist democracy is an even worse idea than high taxes on business during a time of recession.

Though I am encouraged by the move to lower taxes on business, I do not trust President Obama to continue doing the right things for the United States. I am ready for a new President.

[Filmguy870]

Alabama scares me.

[wizardlady]

And, please tell me which of those questionable candidates would you think has the ability to lead this country out of the mess that was made by THE FORMER REPUBLICAN ADMINISTRATION?

IF....President Obama does get the tax loopholes (or deductions) removed as suggested, then the corporations will actually be paying SOME taxes....and at a higher rate than now stated. Does he really think he can get cooperation from the REPUBS in congress? Remember, Corporations are PEOPLE, as declared by the Mighty Nine, and not all people would see this as beneficial to themselves.

[involved_indi]

The President is finally doing something that makes sense for the economy. He's turning into a republican little by little because republican fiscal ideas work and are desperatly needed. This is exactly what the republicans have been pushing for unless there is some strange clause hidden in the Presidents proposal. Good for you, President Obama! Finally those Economics 101 classes are starting to pay dividends.

[skeezix06]

A stupid plan. Who's going to make up the difference between a drop in revenue and steady incoming bills? That's right. We are. What used to be the middle class and the poor will be paying all the bills while the wealthy use our military to protect their profits free of charge.

[involved_indi]

Looks like Obama is finally getting it. Revenue increases have occured when taxes are decreased for years. This is exactly what republicans have wanted to do. By your email its obvious you don't understand economics.