Romney proposes 28 percent top income tax rate

CHANDLER, Arizona (Reuters) - Republican Mitt Romney, looking for a boost in his presidential campaign, proposed an overhaul of the tax system on Wednesday that he said would cut Americans' tax rates by 20 percent and limit deductions for the wealthy.

Romney unveiled his proposals just hours after President Barack Obama offered a plan of his own to revamp the corporate tax system, calling for a cut in the corporate tax rate and the closure of many business tax loopholes.

Adding some details to his earlier tax proposals, Romney's plan would put the top tax rate at 28 percent, down from the present 35 percent.

Romney is seeking to regain momentum in his campaign for the 2012 Republican presidential nomination and survive a strong challenge from conservative Rick Santorum with Arizona and Michigan to hold election contests on February 28.

Romney's campaign hoped his tax plan would help prove his credentials as a fiscal conservative. It was released on a day when the four remaining Republican candidates were to gather in Arizona for another debate. Romney is scheduled to give an economic speech on Friday in Detroit.

"I'm going to lower rates across the board for all Americans by 20 percent," Romney told a campaign rally in Chandler.

Romney said his cuts would help businesses that pay at the individual tax rate to have more money so they can hire more people and pay higher wages.

Obama's re-election campaign immediately questioned how Romney would pay for his plan and avoid massive increases to budget deficits that have soared to $1 trillion under Obama.

"How does Romney pay for his plan? Romney claims to balance the budget, but his proposals to date actually increase the deficit by $2 trillion over the next decade. Will his new tax plan drive up the deficit even further?" the Obama campaign said.

All Republican candidates have called for a flatter, simpler, tax system to replace today's complicated tax code.

Romney's plan includes some standards on the Republicans' wish list for tax reform. He would reduce corporate tax rates from 35 percent to 25 percent, eliminate the inheritance tax and repeal the alternative minimum tax.

Romney said he believed his plans for the U.S. economy, which involve deep cuts in federal spending and overhaul of expensive programs for the poor and elderly, Medicare and Social Security, would trigger job growth and address record deficits.

"The right way forward is a flatter, fairer, simpler tax system that generates the revenue we need to fund a smaller government," said Romney.

To try to limit the impact of lower tax rates on the U.S. deficit, Romney proposed limits on tax deductions. He said the popular deductions for home mortgages and charitable contributions would continue for most Americans, but "for high-income folks, we're going to cut back on that."

"In order to limit any impact on the deficit - 'cause I don't want to add to the deficit...I'm going to limit the deductions and exemptions, particularly for high-income folks," said Romney.

He would maintain the current 15 percent rate on capital gains and proposed that no Americans with annual income below $200,000 pay taxes on capital gains.

(Reporting By Steve Holland; Editing by Kevin Drawbaugh and Jackie Frank)