Romney’s plan would cut all existing tax brackets by the same proportion, including cutting the lowest rate to 8 percent from 10 percent, and limit deductions for higher earners. Romney would also abolish estate taxes and the alternative minimum tax, and lower the corporate tax rate from 35 percent to 25 percent.
Romney unveiled details of his proposal hours after Obama set forth his own vision for a major overhaul of the nation’s corporate tax code. Obama’s plan would lower the nation’s corporate tax rate to 28 percent. And Obama would boost overall revenue from corporate taxation by banning numerous deductions and loopholes that save companies tens of billions of dollars a year on their tax bills.
The current U.S. corporate tax rate of 35 percent is one of the highest in the world, but the abundance of loopholes and deductions enables many businesses to pay far less than that — or nothing at all. Companies in the United States pay almost half the taxes that companies in other rich countries pay, compared with the size of the economy, according to the Organization for Economic Cooperation and Development.
The president’s plan targets oil and gas companies for tax increases while promising special breaks for manufacturing companies.
And in a slap at U.S. multinational corporations that shelter profits overseas, Obama wants those firms to pay a minimum tax on their foreign earnings. He also wants to end tax breaks for companies that outsource and give new tax incentives to firms that move jobs back home.
Both tax proposals were unveiled hours before a key Republican debate in Michigan, where next week’s primary could either reestablish Romney as the clear front-runner or further scramble the field.
It is unclear how either plan would fare in Congress. Many Republicans have favored reducing taxes on businesses well below what either Romney or the president is proposing. But Republicans and Democrats alike have shown support for a tax strategy that reduces rates across the board while eliminating special-interest loopholes.
Romney’s new plan, which goes further than the blueprint he released last September, reflects the political pressure he has faced in recent weeks to offer bold policy prescriptions to help him beat back a fierce challenge on his right from former Pennsylvania senator Rick Santorum.
Santorum took aim at Romney’s proposal and accused him of copying proposals Santorum had already introduced. Santorum’s plan would lower the top individual income tax rate to 28 percent and reduce the number of brackets from six to two, leaving the lowest rate at 10 percent.