President Obama wants to significantly lower the top corporate income tax rate to 28% as part of a broad overhaul that would raise an additional $250 billion from businesses over the next decade by eliminating many loopholes and other breaks, according to a senior administration official.
Full details of the administration’s long-awaited corporate tax reform plan will be released later Wednesday morning by Treasury Secretary Timothy F. Geithner, touching off an election year debate about how much corporations should pay in taxes.
The broad parameters of Obama’s plan include lowering the effective tax rate -- the real amount corporations pay after tax breaks are deducted -- to no more than 25%, down from the current 32%. But the package would seek to raise $250 billion more from corporations over the next 10 years.
To reduce the lure of relocating jobs overseas, Obama will propose a minimum tax for U.S.-based multinational companies. The president pushed that idea in his State of the Union address last month.
“My message is simple: It’s time to stop rewarding businesses that ship jobs overseas and start rewarding companies that create jobs right here in America,” he said.
The details about which tax breaks Obama wants to eliminate will be key as trade groups and industry lobbyists will battle hard to avoid giving up lucrative loopholes. Oil and gas companies are expected to take a hit in the plan as administration officials have frequently criticized tax breaks for an industry they say is so profitable it does not need them.
Republicans and business groups have complained that the U.S. has one of the highest corporate tax rates in the world, which drives companies offshore.
Key House Republicans have said they would like the U.S. rate dropped to 25% and for any overhaul to be revenue-neutral, meaning that the lower rate would be offset by eliminating some loopholes but corporations overall would not end up paying more taxes.
Some Democrats also support lowering the corporate tax rate, though not to 25%, as well as eliminating a host of tax breaks. They would like to use the savings to reduce the deficit instead of cutting government programs.
Congress will have to approve changes to the tax code, and passing such sweeping legislation could be difficult in an election year. But some of the tax breaks Obama will target expire at the end of the year -- along with the George W. Bush-era tax cuts -- providing impetus for action, possibly when Congress returns late in the year after November’s elections.