As the United States gets into the swing of an election-year, President Barack Obama has offered to cut corporate tax rate 28 percent, a move that commentators have said is a direct challenge to his Republican rivals.
President Obama's long-awaited business tax plan, if passed, would lower the corporate tax rate from the current 35 percent to 28 percent.
Calling the current tax system “outdated, unfair, and inefficient”, Obama said:
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.
The 35 percent nominal corporate tax rate is currently the highest in the world after Japan. But deductions, credits and exemptions often allow many corporations to pay taxes at a much lower rate.
Under the framework proposed by the Obama administration, the rate cuts, closed loopholes and the minimum tax on overseas earning would result in no increase to the deficit.
However, the AP said that many who “slip through loopholes or enjoy subsidies and pay an effective tax rate that is substantially less than the 35 percent corporate tax could end up paying more under Obama's plan. Others, however, would pay less while some would simply benefit from a more simplified system.”
Republicans and business groups, who typically seek a 25 percent tax rate with current breaks kept in place, have long complained of the high corporate tax rate in America, and criticized Obama’s lack of policies and measures to help ease the unemployment and economic crunch.
Yet, recent reports have highlighted the low effective tax-rates paid by some of America’s largest and richest companies like Google, Boeing and General Electric.
The New York Times wrote:
One analysis concluded that 115 of the 500 companies in the Standard and Poor’s stock index paid a total corporate tax rate — federal and otherwise — of less than 20 percent over a five-year period.
Corporate taxes make up an increasingly small share of the federal government’s revenue, in part because of tax-avoidance maneuvers by businesses.