President Obama and Republican presidential contender Mitt Romney offered competing proposals Wednesday for how the government should tax citizens and companies, previewing the ideological clash over taxes that is likely to be at the forefront of the general-election campaign.
Obama released a long-awaited plan to overhaul the nation’s corporate tax code that plays directly to his base, following his call this month for significant tax hikes on the wealthiest Americans.
Comparison of corporate income taxes
The new plan would lower the nation’s corporate tax rate to 28 percent from 35 percent. The proposal would also raise the taxes of Democratic boogeymen — including oil and gas companies and multinationals that create jobs overseas — to pay for the reduction in the overall corporate rate.
Shortly after, Romney unveiled a series of deep cuts in personal and corporate income tax rates, the kind of reductions that have become a tenet of Republican economic thinking.
The former Massachusetts governor proposed reducing the rates for individual taxpayers by a fifth, meaning that the highest earners would pay a top rate of 28 percent, compared with 35 percent today. He also suggested taxing corporate profits at a rate of 25 percent.
The topic of taxes is particularly relevant because right after the election, Obama or his Republican successor will have to decide whether to increase taxes to avoid imminent and deep cuts in domestic and defense spending. The next president will also face longer-term questions about how to pay for the nation’s fast-rising entitlement costs.
Yet despite their differences, the dueling proposals shared certain features. For one, they were both short on specifics — in particular, details about which taxpayers would have to pay more to offset the reduction in overall rates.
What’s more, Obama and Romney each sought to inoculate himself against the other’s criticisms.
With his plan to reduce corporate tax rates, Obama is trying to to seem business-friendly, with an eye to bolstering American competitiveness.
“Our business tax system today is bad for economic growth and job creation in the United States,” Treasury Secretary Timothy F. Geithner said in remarks Wednesday. “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.”
Romney’s balancing act
Romney, meanwhile, is trying not to look as if he wants to cut taxes for the rich. He said Wednesday that he would eliminate taxes on capital gains and dividends for people making $200,000 or less and that those making more than $200,000 would face limits on their deductions for items such as charitable contributions.
“I’m going to limit the deductions and exemptions particularly for the higher-income folks,” Romney said. “For high-income folks, we’re going to cut back on that, so that we ensure that the top 1 percent keeps paying the current share they’re paying and more. We want middle-income Americans to be the place that we focus because it’s middle-income Americans who have been hurt by this Obama economy.”
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