The Obama administration called for reducing the corporate tax rate to 28 percent from 35 percent, eliminating tax breaks and changing some core provisions in the tax code.
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 the budget for the plan assumes the lapse of expiring provisions.
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.
Treasury Secretary Timothy F. Geithner released the proposal today in Washington. He called the current U.S. tax code “outdated” and “unfair.”
“The current tax code was written for a different economy in a different era,” he told reporters.
The administration wants the manufacturing tax break to remain while industry-specific tax breaks would end, administration officials told reporters in a briefing provided on condition of anonymity.
Hotels and some other kinds of businesses with operations that by necessity exist offshore would be exempt from the proposed new minimum tax on global earnings, according to the officials.
Administration officials, members of Congress and business groups have been discussing a potential corporate tax overhaul for several years.
They disagree on how low the rate should go and on how income earned outside the U.S. should be taxed.
Michigan Republican Dave Camp, chairman of the House Ways and Means Committee, has proposed a revenue-neutral overhaul of the corporate tax code that would drop the top rate to 25 percent and leave most foreign earnings of U.S. companies untaxed.
The Republican presidential candidates are all proposing to lower corporate taxes without eliminating many tax breaks. Mitt Romney, the former Massachusetts governor, wants a 25 percent rate. Rick Santorum, the former Pennsylvania senator, has proposed a 17.5 percent rate for most companies and a 0 percent rate for manufacturing.
Newt Gingrich, the former House speaker, has called for a 12.5 percent rate. Representative Ron Paul of Texas wants to set the corporate rate at 15 percent.
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