Obama seeks tax reform, paring corporate tax breaks
WASHINGTON (Reuters) - President Barack Obama called on Tuesday for a revamp of the U.S. tax code, a goal shared by his Republican rivals, but the bid to close tax breaks enjoyed by the wealthiest Americans and corporations face familiar roadblocks in Congress.
Lowering the corporate tax rate while scrubbing the code of deductions and asking the richest to pay more were among familiar proposals outlined by Obama in his State of the Union speech to Congress.
"Now is our best chance for bipartisan, comprehensive tax reform that encourages job creation and helps bring down the deficit," Obama said.
The ideas largely mirror those he pitched in his address a year ago. Since then, Obama has won re-election campaigning on what he has called tax fairness, while Republicans have lost congressional seats. But even Obama's backers say they face a tough road in the near term.
"Unless Republicans have a real 'come to Jesus moment,' it is difficult to imagine them supporting many or any of these provisions," said Jim Manley, a former top adviser to Senate Democratic leader Harry Reid.
Before Democrats and Republicans can get to the full-scale revamp of the U.S. tax code that they say they want, they must put out several fiscal fires. The latest stand-off between the White House and congressional Republicans is over automatic spending cuts set to kick in on March 1.
Obama and fellow Democrats back a mix of revenue and tailored spending cuts to avoid what is known as the "sequester," while Republicans oppose any tax increases.
Indeed, Senator Marco Rubio, who is giving the Republican response to Obama's speech, said his party would not agree to new taxes.
"I hope the president will abandon his obsession with raising taxes and instead work with us to achieve real growth in our economy," Rubio said in excerpts of remarks released before he spoke.
A full-scale tax code overhaul is a massive endeavor, and it has been somewhat crowded out by issues like immigration and gun control in recent weeks and months.
Republican Representative Dave Camp, who chairs the tax-writing House Ways and Means Committee, is working on a plan to revamp the tax code. Senate Finance Committee Chairman Max Baucus, a Democrat, is also working on a proposal.
"It is not an issue that has much momentum behind it, but having people like the president and Dave Camp talking about it will help that," said Erik Smith, a former adviser to Obama who now advises companies at Blue Engine Media.
Obama has also called for review of the corporate tax code - including lowering the top corporate tax rate to 28 percent from 35 percent, to be paid for by closing business tax breaks.
Republicans back a lower corporate rate but have resisted the idea of tackling it in isolation because many businesses file taxes through the individual side of the tax code and would be left out.
Obama also again proposed a minimum tax on offshore earnings, aimed at spurring domestic investment and to "prevent a race to the bottom in corporate tax rates."