President Obama to Propose Dropping Corporate Tax Rate to 28%
It’sgoing to be a busy day in the tax world,asPresident Obama will be unveiling his long-awaited proposal for corporate tax reform in a few hours. Expected to be included among the proposals are the following:
- Areduction in the corporate tax rate from 35% to 28%;
- A modification to Section 199 to ensure that U.S. manufacturers pay no more than a 25% effective tax rate;
- Elimination of up to a dozen tax deductions currently available;
- Renewal of the R&D credit under Section 41; and
- The addition of a “worldwide minimum tax” to ensure that U.S. corporations that move operations offshore pay tax on its overseas profits.
It’s important to note, while the 7% reduction in the corporate tax rate may look universally appetizing, for those corporations that currently take advantage of many of the tax preferences on the chopping block, they may actually see their effective tax rate increase as a result of the lost deductions. Those corporations — typically in the technology and pharmaceutical fields — likely will not be on board with the proposed changes.
In general, however, corporate tax reform is one of the few areas where Republicans and Democrats may be able to find some common ground, as it is widely recognized that the current corporate tax regime is putting the U.S. at a competitive disadvantage with other nations.
