WASHINGTON (Reuters) – President Barack Obama, who has angered businesses with his plans to close corporate tax loopholes, is expected to 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 close to an average of peer nations, the sources said.
This would fit 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 breaks for companies that move facilities and jobs overseas – in his State of the Union speech in January, and is expected to lay out principles for revamping corporate taxes as soon as this month.
Facing a potentially tough presidential re-election challenge this November, Obama will propose cutting the rate in the days after he releases 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.
Obama’s Treasury Department was close to releasing a revamp of corporate taxes last year, but pulled back after business opposition, according a former official.
Republican Representative Dave Camp, the chairman of the tax-law writing House Ways and Means committee, has set a goal of trimming the top 35 percent corporate rate to 25 percent.
Gene Sperling, head 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 is also likely to 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)
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