In a move that is likely to spark an intense election-year battle over the federal budget, the Obama administration unveiled plans Wednesday to lower the top tax rate for corporations while striking loopholes and providing incentives for businesses to retain domestic jobs.
Specifically, the White House's tax plan involves a lowering of the corporate tax rate from its current level of 35 percent - which is one of the highest in the developed world - to 28 percent. Simultaneously, the plan includes the elimination of enough tax loopholes to actually raise revenue over the next several years. Furthermore, manufacturers would see their top tax rate drop to 25 percent.
Officials argue the measures would help drive competition and corporate investment by revamping a tax code that has long been criticized as inefficient and unconducive to corporate growth. Treasury Secretary Timothy Geithner told a Congressional committee last week that such a tax plan "will help level the playing field for businesses and allow the government to collect needed revenue while promoting economic growth," The New York Times reports.
A statement released by the White House this week further specified the plan as designed to "enhance American competitiveness by simplifying the tax code and eliminating dozens of loopholes and subsidies; incentivizing job creation and investment here at home; and lowering the business rate while broadening the tax base."
But given the coming presidential election, some critics are lambasting the move as mere political posturing. Analysts point out that the prospect of a tax overhaul is simply not likely this year.
"Make no mistake," writes Norah O'Donnell for CBS News, "the president's political advisers want an election year debate - not just about the corporate tax code system, but also the whole tax system, in general. And so that's why they're setting up that debate this week for the president to make that, but there is little chance this year that this tax reform proposal will make it through Congress, because there's too much politics going on."
O'Donnell added that some corporations may even see a slight increase in the amount of taxes they pay when all the loopholes and exemptions are factored in. Still, most agree that any tax code that allows massive corporations such as Google, Boeing and General Electric to pay next to nothing in effective taxes needs to be modified. For small-time entrepreneurs looking to incorporate in California or Texas, it may just be a matter of fairness.
Tags : California, Texas, Taxes, S Corp, C Corp
Posted: Feb 22nd, 2012