The move would close dozens of loopholes that allow some US corporations to avoid tax and encourages them to offshore jobs. In return, corporate and manufacturing tax rates would be lowered and the tax regime simplified.
The revenue windfall gained from the move to this new business tax regime would be used to fund a series of programmes to improve infrastructure, create new manufacturing centres and equip workers with new skills.
President Barack Obama said yesterday: ‘We should be doing everything we can as a country to create more good jobs that pay good wages.’
Reaching out to his political opponents, the president said he wanted to offer something that both Democrats and Republicans could get behind.
‘A deal that simplifies the corporate tax code for our businesses and creates good jobs with good wages for middle-class folks who work at those businesses,’ he said in a speech in Chattanooga, Tennessee.
The revenue-neutral reforms would end the ‘broken and complex’ current tax code, remove incentives to ship jobs overseas and lower the tax rate paid by businesses that create jobs in the US, the White House said.
Under the reforms, the tax rate for businesses would not be higher than 28% and for manufacturers than 25%. The tax filing system for small businesses will also be simplified.
While some corporations would pay more tax, following the change, other businesses would pay less. Obama is concerned that large firms are hiring teams of lawyers to help them avoid their tax liabilities altogether and wants everyone to pay their fair share.
But the president stressed that a better deal for business meant a better deal for workers.
‘I want to see some of the money we save by closing these loopholes to create more good constructing jobs with infrastructure initiatives… we can build a broader network of high-tech manufacturing hubs that leaders from both parties can support,’ he said.
Business Roundtable, an association of leading US CEOs, cautioned against using tax reforms to fund spending.
Roundtable president John Engler said: ‘We agree with the president on the importance of lowering the US business tax rate, now the highest in the developed world.
'But corporate tax reform should be part of a comprehensive fix for the individual and business tax codes, and corporate reform should be achieved in a revenue neutral manner. Moreover, all revenues from corporate base-broadening measures should be applied to corporate rate reduction and to modernising our international tax system, not for unrelated spending.’
