Corporate income taxes have been shrinking as a share of overall federal taxes for decades. In 2010, corporate income taxes made up just 12 percent of all federal tax receipts, down from 24 percent in 1960, according to the IRS.
Reducing the corporate tax rate to 28 percent would reduce tax revenues by about $700 billion over the next decade, according to an estimate prepared in October by the Joint Committee on Taxation, the official scorekeeper for Congress.
That means lawmakers would have to find about $70 billion a year in tax increases to keep the package from adding to the budget deficit, hardly an easy task.
Treasury Secretary Timothy Geithner, who presented Obama's plan, acknowledged that the debate "will be politically contentious."
"Some will say these proposals are too tough on business, and others will say that they're not tough enough," he said.
Indeed, several liberal-leaning groups criticized Obama's plan for being "revenue neutral" and not generating more tax money to pay for government programs. "We can and should collect more tax revenue from corporations," said Bob McIntyre, the director of Citizens for Tax Justice.
But the business groups objected to Obama's plan to impose a minimum tax on foreign earnings, insisting instead that the administration embrace a "territorial" system of taxation.
The United States taxes U.S.-based multinational corporations on foreign profits, once that money is returned to the United States. In a territorial system, the U.S. would only tax profits made in the U.S. By taxing the foreign profits of U.S.-based multinationals, the U.S. has a worldwide system of taxation.
Those foreign profits are not taxed unless they are brought to the United States. And, in many cases, they are simply reinvested overseas, so they are never subjected to U.S. taxes. Administration officials said that under Obama's plan, multinational corporations would continue to receive a tax credit for any taxes they pay overseas.
Among critics of his plan were the U.S. Chamber of Commerce and the high-tech industry, a group Obama has been eager to court.
"The framework would punish successful companies and push investments out of the United States," said Dean Garfield, president and CEO of the Information Technology Industry Council, which represents firms such as Cisco Systems Inc., Google, Apple Inc., and Intel Corp.
Associated Press writers Martin Crutsinger and Stephen Ohlemacher in Washington and Kasie Hunt in Mesa, Ariz., contributed to this report.
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