Corporate tax proposal could positively impact U.S. manufacturers
The President Barack Obama administration has proposed a revamped corporate tax structure for the U.S., as the White House is looking to spur economic growth through the closing of loopholes and lowering overall rates for corporations, according to Bloomberg.
The news outlet reported that the President called for a reduction of the corporate tax rate to 28 percent from 35, a move that would also include eliminating tax breaks and changing core features of the tax code such as interest deductibility.
Bloomberg reported that the plan, which leaves many details up to Congress, would keep tax breaks for corporate research, renewable energy and manufacturing. This move may change the business strategy for some firms, while rewarding others that boost production in the U.S.
"It is time to stop rewarding businesses that ship jobs overseas, and start rewarding companies that create jobs right here in America," Obama said in a written statement. "It's not right and it needs to change."
The Associated Press reported that the President's plan would allow manufacturers to receive incentives so that their effective tax rate could be even lower.
"It's a framework that lowers the corporate tax rate and broadens the tax base in order to increase competitiveness for companies across the nation," Obama said in a statement.
The AP reported that the closing of loopholes and subsidies would provide for more transparency, while corporations with overseas operations would now face an unspecified minimum tax on their foreign earnings. This move may lead companies to bring production back to the U.S.
Timothy Geithner said the plan put forth by Obama aims to help U.S. businesses, especially manufacturers who are currently facing strong international competition. The proposal could end up lowering the tax rate for companies who produce in America to roughly 25 percent.
According to the AP, the plan did not stop there, as the President included a proposal that would give further tax breaks to companies who return jobs to the U.S., and manufacturing operations back to communities that lost significant facilities.
"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," Treasury Secretary Timothy Geithner said in unveiling the plan to reporters Wednesday, according to the USA Today.
Geithner also noted that the tax break would be even lower than 25 percent for companies who are taking part in "advanced" manufacturing activities, according to the news source.