President Obama’s tax reform proposal unveiled Wednesday played to mixed reviews, as critics assailed the plan for failing to address individual tax reform and argued that it would increase the tax burden on businesses despite its claims to lower the corporate tax rate.
Treasury Secretary Timothy F. Geithner outlined highlights of the plan Wednesday and said the proposal — which would cut corporate tax rates while repealing special deductions for businesses and imposing a new minimum tax on foreign earnings of U.S. companies — would help simplify the tax code, level the playing field and encourage businesses that have moved their operations overseas to return.
Republicans and business groups were immediately skeptical, and even the administration’s presentation of the plan implied that the White House does not consider it a high priority.
Presidential contender Mitt Romney said the proposal is misleading because it appears to cut taxes on businesses but actually amounts to a major tax increase to the tune of hundreds of billions of dollars.
“It sounds like he’s lowering taxes, but in fact he’s raising taxes — raising taxes on businesses by hundreds of billions of dollars,” Mr. Romney said.
Mr. Obama’s tax plan would eliminate a number of tax breaks and subsidies for corporations and reduce the top marginal corporate income-tax rate from 35 percent to 28 percent.
Mr. Romney said the president is ignoring all of the small businesses that file their taxes as individual income and is failing to get a grip on deficits, which also crowd out private investment.
“We’ve got to have more jobs, less debt and smaller government. They go together. You can’t just do one of those things by itself,” he said.
John Engler, who heads the Business Roundtable, an association of executives from some of the country’s largest companies, said the proposal to cut rates to 28 percent still would leave the U.S. combined corporate rate 8 percentage points higher than the average of other competing countries. He also criticized the inclusion of a minimum tax on the foreign earnings of U.S. corporations, arguing that no other developed country has such a tax.
“The framework adds complexity and raises taxes, moving us away from the rest of the world,” Mr. Engler said.
Sen. Orrin G. Hatch of Utah, the ranking Republican on the Senate Finance Committee, was even more critical, calling the framework “murky, ill-defined and contradictory to the goal of reducing complexity and making our tax code more efficient.”
“America’s tax system is broken to the point that it’s putting our nation at a competitive disadvantage around the world,” said Mr. Hatch, who faces a tough re-election battle this year.
The Utah Republican echoed Mr. Romney’s arguments about the failure to include small businesses and said the proposal lacked detail and ignored recommendations from Republicans on the tax-writing Finance Committee to lower the corporate rate to 25 percent.
“I’d hope the White House would recognize the severity of the problem with a real plan and real leadership. But, after months of promises, we instead got a set of bullet points designed more for the campaign trail than an actual blueprint for fixing our tax code,” he said.
Other leading tax writers on Capitol Hill were less harsh in their assessment.