Obama Calls For Corporate Tax Reduction
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The Obama administration sketched out a roadmap today to streamline the corporate tax code. The plan would do away with dozens of tax breaks that benefit specific industries, while lowering the overall tax rate. Business groups offered mixed reviews.
And as NPR's Scott Horsley reports, any real changes are unlikely during this election year.
SCOTT HORSLEY, BYLINE: President Obama's statement today that the corporate tax rate is outdated, unfair, and inefficient is hardly new. He made much the same point more than a year ago, in a speech to the U.S. Chamber of Commerce.
PRESIDENT BARACK OBAMA: You've got too many companies ending up making decisions based on what their tax director says, instead of what their engineer designs or what their factories produce. And that puts our entire economy at a disadvantage.
HORSLEY: But even though Mr. Obama raised the issue in last year's State of the Union Address, it was only today his administration put forward a specific proposal to rewrite the tax code. White House spokesman Jay Carney says that plan would do away with numerous business credits and deductions, and make filing simpler for small businesses.
JAY CARNEY: It does what so many people say is important to do, which is lower the rate, broaden the base; eliminate the underbrush of unnecessary subsidies and loopholes, and special provisions that complicate the tax code. That money can then be used to pay for an action that would lower the rates for everybody.
HORSLEY: Under the president's plan, the top corporate rate would fall from 35 percent, one of the highest in the world, to 28 percent.
Donald Marron, who directs the Tax Policy Center, says lower taxes, applied more equally, would be a big improvement over the current tax code.
DONALD MARRON: The system really plays favorites between different types of businesses. You know, so if you're in the mining world, you have a much lower tax rate than if you're a retailer. And it's hard to tell a story about why that is socially good.
HORSLEY: While doing away with most special tax rates, the president's plan would add a new one for manufacturers, lowering their effective tax rate to 25 percent. The plan would also add a new minimum tax on multinational companies, in an effort to discourage them from shifting operations to other low-tax countries. Business groups generally oppose that minimum tax and some want to see lower rates overall.
Republican Mitt Romney has called today for a top corporate tax rate of 25 percent. Marron says while the broad outlines of the plans are similar, that breaks down when you look more closely.
MARRON: There's a lot of consensus, big picture. But, as always, the devil is in the details. Everyone is always much more specific about what they would do to tax rates, which is bring them down, than they are typically about what tax breaks they'd get rid of.
HORSLEY: Treasury Secretary Geithner says today's proposal is merely the beginning of a long and contentious process. Marron says no one should expect a speedy resolution.
MARRON: The history is that these things are a process, not an event. If you think back to the Tax Reform Act of 1986, which was the last major overhaul of the tax code, you know, that began with a lot of folks working very hard on those issues in 1982, if not earlier.
HORSLEY: The top Republican on the Senate tax-writing committee warns that last overhaul required laser-like focus from then-President Ronald Reagan, something he hasn't yet seen from this president.
Scott Horsley, NPR News, Washington.
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