WASHINGTON (AP) ? The Obama administration will propose lowering the current 35 percent corporate tax rate, while at the same time eliminating loopholes and subsidies and imposing a minimum tax on the overseas profits of American companies.
Administration officials said the Treasury Department on Wednesday will detail aspects of President Barack Obama’s proposed overhaul of the corporate tax system, a plan he broadly outlined in his State of the Union speech last month.
The 35 percent nominal corporate tax rate is the highest in the world after Japan. But deductions, credits and exemptions allow many corporations to pay taxes at a much lower rate.
The administration plan is not likely to go as far as a House Republican proposal to lower the rate to 25 percent. But Treasury Secretary Timothy Geithner told a House committee last week that the administration wants to create more incentives for corporations to invest in the United States.
“We want to bring down the rate, and we think we can, to a level that’s closer to the average of that of our major competitors,” Geithner told the House Ways and Means Committee.
While providing no specifics, Obama has said corporate tax rates are too high and has proposed eliminating tax breaks for American companies that move jobs and profits overseas. He has also proposed giving tax breaks to U.S. manufacturers, to firms that return jobs to this country and to companies that relocate to some communities that have lost big employers.
White House economic adviser Gene Sperling has said the administration also is seeking a minimum tax on global profits. Currently many corporations do not invest overseas profits in the United States to avoid the 35 percent tax rate.
Treasury will be offering broad principles of its plans but will not offer specific legislation, the administration officials said, speaking on condition of anonymity to describe what the administration will do.
Many members of both parties have said they favor overhauling the nation’s individual and corporate tax systems, which they complain have rates that are too high and are riddled with too many deductions. But because of the political pressures of this election year, few expect lawmakers to make major progress this year in revamping the tax code.
The corporate tax debate has also become an element of presidential politics. Former Massachusetts Gov. Mitt Romney has called for a 25 percent rate, former House Speaker Newt Gingrich, R-Ga., would cut the corporate tax rate to 12.5 percent, and former Sen. Rick Santorum, R-Pa., would exempt domestic manufacturers from the corporate tax and halve the top rate for other businesses.
While Obama has been promoting various aspects of his economic agenda in personal appearances and speeches, officials said he was leaving the corporate tax plan to the Treasury Department to unveil, a signal of its lower priority.
Associated Press writer Alan Fram contributed to this report.