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.
Rep. Dave Camp, Michigan Republican and chairman of the House Ways and Means Committee, gave the president credit for presenting a framework for reform, but said the proposal was not comprehensive enough. He said he needed more time to review other parts of the plan, including its attempt to bring home roughly $1 trillion in U.S. profits "trapped overseas."
"This administration will find a ready and willing partner in House Republicans when it comes to comprehensive tax reform that cuts rates to spur economic growth and job creation," he said. "We put it in our budget last year, we have spent more than a year debating it in committee and we have worked with the Senate to advance this cause."
Rep. Sander M. Levin of Michigan, the ranking Democrat on the Ways and Means panel, applauded the proposal, arguing that it made clear that any reform should be driven by a "clear set of goals, not only a number."
"The administration has put the focus of corporate tax reform where it needs to be: on promoting investment, job creation and especially manufacturing in the United States, not overseas," he said.
While the plan establishes an election-year standard for the tax overhaul he and other Democrats want to pursue, the plan has little chance of passing in such a polarized political year that likely will be dominated by the presidential and congressional elections.
The president also signaled the proposal's lower priority by letting Mr. Geithner make the announcement, unlike other top economic agenda items that Mr. Obama has announced in personal appearances or speeches. Instead, he simply issued a written statement.
"Our current corporate tax system is outdated, unfair, and inefficient," Mr. Obama said in the statement. "It provides tax breaks for moving jobs and profits overseas and hits companies that choose to stay in America with one of the highest tax rates in the world. It is unnecessarily complicated and forces America's small businesses to spend countless hours and dollars filing their taxes. It's not right, and it needs to change."
Eliminating subsidies and closing tax loopholes for such businesses as the oil and gas industries would allow the federal government to lower corporate rates, which are higher than in many other industrialized countries, Mr. Geithner argued earlier.
"Whatever you call them — they are subsidies and they are expensive, costing billions of dollars a year," he said.
While the plan did not deal with individual tax rates and reform, Mr. Obama has continued to push for raising taxes on individuals making more than $1 million to 30 percent — the so-called "Buffett Rule" named after billionaire financier Warren Buffett.
The president supports maintaining current rates for households making less than $200,000 a year.
Meanwhile, some progressive groups attacked the Obama plan from the left, saying changes in the corporate tax code should overtly attempt to raise more money rather than sell themselves as "revenue-neutral."
"We can and should collect more tax revenue from corporations," said Bob McIntyre, director of Citizens for Tax Justice. "In 1986, President Reagan and Congress passed a tax reform act that increased corporate tax payments by more than a third. In today's terms, that would be a corporate tax increase of more than $1 trillion over the next 10 years. The corporate tax reform that we need today should do no less."
• Stephen Dinan contributed to this report.
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Susan Crabtree is an award-winning investigative reporter with more than 15 years of reporting experience in Washington, D.C. Her reporting about bribery, corruption and conflict-of-interest issues on Capitol Hill has led to several FBI and ethics investigations, as well as consequences for members within their caucuses and at the ballot box. Susan can be reached at email@example.com.
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