By Teresa Welsh |
On Wednesday, the Obama administration released plans to overhaul the country’s corporate tax code.
“We want to restore a system in which American businesses succeed or fail based on the products they make and the services they provide, not on the creativity of their tax engineers or the lobbyists they hire,” Treasury Secretary Timothy Geithner said during the administration’s announcement of the new proposal.
The election-year proposal would cut the top corporate tax rate—currently the highest in the modern world—from 35 percent to 28 percent. In exchange for a lower tax rate, Obama’s proposal would remove loopholes employed in all different sectors that allow companies to avoid paying taxes.
The plan hits oil and gas companies hardest, removing what Geithner referred to as “special benefits” for those industries. The proposal would benefit small businesses, manufacturing, and clean energy, industries favored by the current administration.
Proponents of reforming the corporate tax code argue that the United States has been at a competitive disadvantage for years because of the corporate tax rate. They point to other countries with significantly lower corporate tax rates and explain how doing business in other countries is cheaper.
Some critics of Obama’s proposal argue that it doesn’t go far enough, as even a 28 percent tax rate would still be the third-highest tax rate in the developed world, slightly better than the rates in France and Japan. Others assert that the Obama administration is picking favorites in the private sector by proposing to provide tax breaks for certain industries.
Is Obama’s corporate tax plan a good idea? Here’s the Debate Club’s take:
Nick Tuszynski Fellow at George Mason University's Mercatus Center
William McBride Economist at the Tax Foundation
Ryan Ellis Tax Policy Director at Americans for Tax Reform