The Obama administration called for reducing the corporate tax rate to 28 percent from 35 percent, eliminating tax breaks and changing core features of the tax code such as interest deductibility.
The plan, which leaves many details up to Congress, would retain tax breaks for corporate research, manufacturing and renewable energy. Over the next decade, the proposal would raise $250 billion more than the current corporate tax system does, because expiring provisions would either be allowed to lapse or offset with revenue increases elsewhere.
“It is time to stop rewarding businesses that ship jobs overseas, and start rewarding companies that create jobs right here in America,” President Barack Obama said in a written statement last week.
The proposal includes ideas his administration has previously advanced and adds a few new ones. U.S.-based companies with overseas operations would face a new minimum tax on their global profits.
New taxes would be imposed on some insurance products, depreciation schedules would get longer and companies would face new restrictions on the deductibility of interest. Large companies that aren’t structured as corporations could face higher taxes, though the proposal isn’t specific on how that would happen.
Rep. Dave Camp, the Michigan Republican who is chairman of the House Ways and Means Committee, said he appreciated the administration’s attention to corporate taxation even though there are disagreements over the taxation of income earned outside the country and Obama’s reluctance to offer a plan that also addresses individual taxation.
“While this is a good step by the administration,” he said in a statement, “I will borrow from the president’s own words to Congress from just yesterday: Don’t stop here. Keep going.”
Treasury Secretary Timothy F. Geithner released the proposal Feb. 22 in Washington. He called the current U.S. tax code “outdated” and “unfair.”
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