Obama Administration Will Propose Reduction In Corporate Tax Rate

The administration will propose a reduction in the corporate tax rate from 35% to 28$. It will set the top rate for manufacturing companies that face global competition at 25%. It claims that the tax cuts can be paid for by eliminating loopholes in the corporate tax system. This will be difficult since a government study showed that eliminated all of the loopholes would be required to pay for a reduction of the tax rate to 28%. Corporations that benefit from loopholes will lobby against closing those that affect them.

Its hard not to disassociate this proposal from the 2012 election. The GOP has been campaigning on reducing the top tax rate to 25%. This proposal takes one of their planks away from them and it shifts the discussion to the loopholes. The GOP argues that the US has the highest corporate tax rate and that it makes US firms less competitive. Few corporations pay the top tax rate. They use a variety of methods to reduce their effective tax rate. Corporate share of total of total tax revenues has fallen considerably over the last 35 years. What they don't pay has to be made up elsewhere to keep total tax revenues as a share of GDP constant.