In a briefing with reporters Wednesday, Treasury Secretary Timothy Geithner laid out the five principles underlying the proposed reforms. Any corporate tax reform should eliminate scores of loopholes and subsidies and use the savings to lower rates — specifically from a current top rate of 35 percent down to 25 percent.
The new system should likewise prioritize U.S. manufacturing, according to the administration, by creating permanent incentives that allow American manufacturers to pay an effective rate of no more than 25 percent.
The White House is also proposing a new minimum tax on foreign earnings, to encourage domestic investment, and limit the extent to which companies can defer taxation by delaying repatriation of foreign income.
Officials say the reformed code should make filing simpler for small business owners; and that the overall reforms should be deficit neutral or better.
The framework is designed to be implemented separately from broader reform of the individual tax code.
But with the looming expiry of the Bush tax cuts, and deep automatic spending cuts scheduled to kick in on January 1, 2013, the new push could become tied to a broader fight over the country’s safety net, and whether wealthy earners should contribute more than they do to sustain key federal programs.
“This process is going to take some time,” Geithner said. “It’s going to be politically contentious.”
