White House Floats Corporate Tax Cut
While the plan is unlikely to go anywhere in a partisan Congress, Obama's expected to use the plan as a campaign talking point.
| Posted Wednesday, Feb. 22, 2012, at 10:11 AM ET
Photo by Mark Wilson/Getty Images.
President Obama is set to unveil a plan Wednesday to lower the corporate tax rate from 35 to 28 percent. The administration says the proposal would generate revenue by eliminating "dozens" of loopholes and subsidies, and by setting a minimum tax on foreign earnings, Politico reports.
The proposed corporate tax framework would also provide preference to manufacturers, ensuring a maximum effective tax rate of 25 percent.
Although the corporate tax code is badly in need of reform, Wednesday's announcement is more political than practical: With Congress unlikely to pass any major legislation this year, the reform blueprint will primarily serve as a talking point for Obama's re-election campaign.
Republicans (including Mitt Romney) and business groups have called for a 25 percent corporate tax rate. Some are in favor of keeping the current loopholes and subsidies as well, the New York Times explains. Although the 35 percent tax rate is one of the highest in the world, as Republicans are fond of saying, corporations end up paying just slightly more in taxes on average than their competitors in other developed companies do, thanks to the aforementioned loopholes. Some American corporations even pay zero in federal taxes.
The elimination of loopholes is aimed to offset the considerable loss of revenue anticipated by a lowered corporate tax rate. The 28 percent rate itself is in alignment with the findings of the Congress's nonpartisan Joint Committee on Taxation, which found that reducing the tax rate below 28 percent would add to the deficit, even if every current corporate tax break were eliminated. Republicans dispute that finding, saying the committee failed to consider a number of "obscure" tax breaks that could be scrapped to lower the rate further, the Times notes.
But some analysts question whether the elimination of some tax subsidies and loopholes will be enough to make up for what the 28 percent rate would add to the deficit. Some of the more popular corporate tax breaks are supported by both political parties and are unlikely to be scrapped.
