WASHINGTON (Reuters) President Barack Obama will call for cutting the top 35 percent corporate tax rate as early as this month, according to two sources close to the administration.
The president is likely to propose a rate closer to an average of that seen in peer nations, the sources said.
This would jibe with remarks made last year by Treasury Secretary Timothy Geithner, who suggested the United States should be moving to a rate more in line with its major trading partners in the high 20-percent range.
Obama outlined tax measures - including closing tax loopholes for companies that move facilities and jobs overseas - in his State of the Union speech in January, and will lay out principles for revamping corporate taxes by the end of February, a senior administration official said.
“We will talk more before the end of the month on what corporate tax reform would look like,” the official said on Friday, confirming that it would include a call for “lower rates.”
Facing a potentially tough presidential re-election challenge this November, Obama will propose cutting the rate following the release of his 2013 budget plan on Monday, February 13, according to the sources, who were not authorized to speak on the record.
While he spent a big part of his January speech to Congress criticizing businesses for moving jobs overseas, Obama said that “companies that choose to stay in America get hit with one of the highest tax rates in the world.”
Only Japan has a steeper corporate tax rate than the United States among industrialized countries, though other countries make up the revenue with a value-added tax, he said. The United States does not have a VAT.
An overhaul of the corporate tax system is extremely unlikely in an election year, but the president’s proposal could be an olive branch to the business community to show that he agrees with them on one key aspect of tax reform.
“I think what he will end up doing is saying, ‘For years folks have been asking for a lower corporate rate, and here it is - what do you think?,'” said Jared Bernstein, a former economic advisor to Vice President Joe Biden.
Obama’s Treasury Department was close to releasing a revamp of corporate taxes last year, but pulled back after business opposition, according to a former official.
Republican Rep. Dave Camp, the chairman of the U.S. House of Representatives’ tax-law writing Ways and Means committee, has set a goal of trimming the top 35 percent corporate rate to 25 percent.
Gene Sperling, director of Obama’s National Economic Council, has told reporters that the president will be laying out “principles” for corporate tax reform close to the budget release.
Obama’s corporate plan will also include a new minimum tax on foreign profits earned in low tax countries - an unpopular idea in the corporate community.
Reporting By Kim Dixon, editing by Kevin Drawbaugh, Gary Crosse