Geithner presses case for revamping corporate taxes

Treasury Secretary Timothy Geithner (File) / AP Photo/Susan Walsh

Presenting the Obama administration's plan to overhaul business taxes, U.S. Treasury Secretary Tim Geithner on Wednesday proposed lowering the top corporate income-tax rate from 35 percent to 28 percent, while eliminating dozens of tax breaks.

"The last time we fundamentally reformed the business tax code was more than 25 years ago," Geithner said in prepared remarks. "That was before the Internet, before the cell phone, before the rise of China and other emerging markets, before the latest expansion in global investment and trade, and before a global trend to lower corporate tax rates around the world. The current tax code was written for a different economy in a different era. It needs to be reformed and modernized."

The White House also would set a minimum tax on multinational corporations' overseas profits, a bid to discourage large U.S. companies from shifting operations abroad. The plan would offer an even larger tax cut for manufacturers, reducing the maximum effective rate -- how much businesses actually pay, rather than the nominal statutory rate -- to 25 percent. Tax preferences for energy companies, such as the right to deduct certain drilling costs associated with oil and gas exploration, also would be eliminated.

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Obama would allow small businesses to expense up to $1 million in investments, an increase from the current limit of $500,000, and permit so-called cash accounting for companies with up to $10 million in annual gross receipts. Filing taxes also would be simplified in an effort to reduce compliance costs for smaller enterprises.

President Obama outlined the tax reform measures during his State of the Union address in January. In a statement today on the White House "framework" for corporate tax reform, he called the current system "outdated, unfair, and inefficient."

"That's why my administration released a framework for reform that simplifies the tax code, eliminates dozens of tax loopholes and subsidies, and promotes job creation right here at home," Obama said. "It's a framework that lowers the corporate tax rate and broadens the tax base in order to increase competitiveness for companies across the nation. It cuts tax rates even further for manufacturers that are creating new products and manufacturing goods here in America. Finally, because no company should be able to avoid paying its fair share of taxes by moving jobs and profits overseas, this framework includes a basic minimum tax for every multinational company."

Obama wants to revamp the corporate tax code while not increasing the federal deficit. Administration officials who shared details of the plan with reporters on Tuesday said it will not "add a dime to the deficit," according to Reuters. As a result, revenue raised by closing loopholes and subsidies for most businesses would largely go toward offsetting the cost of the new tax cuts for manufacturers and for additional incentives for research and development.

"The United States has a relatively narrow corporate tax base compared to other countries -- a tax base reduced by loopholes, tax expenditures, and tax planning," according to a document on the Treasury Department's website that laid out the case for changing the corporate tax code. "This is combined with a statutory corporate tax rate that will soon be the highest among advanced countries. As a result of this combination of a relatively narrow tax base and a high statutory tax rate, the U.S. tax system is uncompetitive and inefficient."

Yet while the administration provided details on certain elements of the tax plan, it only laid down broad principles for other aspects of reform. For instance, the White House wants to establish greater rate parity between large corporations and smaller companies, with its blueprint framing that goal "as a way to help improve equity, reduce distortions in how businesses organize themselves, and finance lower tax rates." Yet the proposal offers no specifics on how to level the playing field for big and smaller businesses, noting only that a "variety of ways to do this have been proposed."

That unwillingness to flesh out major aspects of the proposal may be partly by design. It puts the onus for filling in what are crucial, and contentious, details for improving the nation's corporate tax system on Congress.

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[RobAla]

How long are we going to have to put up this tax cheat?

[wfw3536]

Why should I belive this tax cheat, who 2 years in a row tried to not pay his fair share of taxes. Oh, do not forget Tim G. was the guy who was the head of the New York Fed when he closed his eyes or was too dumb when the big banks took us to the cleaners.

[credibility2]

I'd rather hear something from someone who lawfully files their taxes and doesn't do whatever is possible to avoid filing them. Geithner is like the fox guarding the hen house.

[Smokey75]

Election time and Obama wants to be elected so its time to start pushing GOP ideas as his own!

What a freaken loser!

[freeamerica31]

Not enough. Just move the business tax down to 10% and watch the jobs come back to the U.S..

[sjc_1]

David Stockman told Reagan to cut spending FIRST, THEN you can consider tax cuts. For more than 30 years the Republicans never got even the basic fundamentals of that simple idea, hence the huge debt we now have.

[dj_chi]

About time we tried to remove incentives to outsourcing jobs! America can't operate with just the checkout counter and UPS delivery jobs left for us. We used to be told that the meanial manufacturing jobs would go overseas and the good jobs designing stuff would stay here. But with even those good jobs going overseas, we're giving away the store! We can't be the greatest nation in the world if we keep treating our workforce like they're part of the problem.

Change the tax code and give domestic jobs more than bumper sticker support.

[retm-w]

They have been following the Reagan plan, no manufacturing just a service economy.

[josephp5]

Trouble is they will pass the tax cut part and never quite get to eliminating the loopholes. This is just bait-and-switch.