More On Tax Planningfrom The Advisor's Professional Library
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- IRAs: In General Individual Retirement Accounts are highly popular tools for contributing funds that grow on a tax deferred basis. Depending on the type of IRA, the accumulation can be tax free.
President Barack Obama plans to issue a proposal to overhaul the U.S. corporate tax system in February, Jason Furman, the deputy director of the Administration’s National Economic Council, said Wednesday.
Furman said that the corporate tax proposal would be released simultaneous to the administration’s fiscal 2013 budget plan, which is scheduled to be sent to Congress on Feb. 13.
During his State of the Union speech on Tuesday, Obama said reforming the tax code will help bring “jobs back” to the U.S. “Right now, companies get tax breaks for moving jobs and profits overseas. Meanwhile, companies that choose to stay in America get hit with one of the highest tax rates in the world. It makes no sense, and everyone knows it. So let’s change it,” Obama said.
Obama wants to lower the current 35% corporate tax rate but has not said what the new rate would be.
“First, if you’re a business that wants to outsource jobs, you shouldn’t get a tax deduction for doing it. That money should be used to cover moving expenses for companies like Master Lock that decide to bring jobs home,” he said.
Second, “no American company should be able to avoid paying its fair share of taxes by moving jobs and profits overseas. From now on, every multinational company should have to pay a basic minimum tax. And every penny should go towards lowering taxes for companies that choose to stay here and hire here in America,” Obama said.
Third, he continued, “if you’re an American manufacturer, you should get a bigger tax cut. If you’re a high-tech manufacturer, we should double the tax deduction you get for making your products here. And if you want to relocate in a community that was hit hard when a factory left town, you should get help financing a new plant, equipment, or training for new workers.”
“My message is simple,” he said. “It is time to stop rewarding businesses that ship jobs overseas, and start rewarding companies that create jobs right here in America. Send me these tax reforms, and I will sign them right away.”
The RATE Coalition, a group of 25 companies and organizations that employ approximately 30 million people across all 50 states, responded to the reports of Obama’s forthcoming proposals to overhaul the nation’s corporate tax code.
“Reforming our 35% corporate tax rate while simultaneously broadening the tax base by eliminating exemptions and tax breaks is one of the most effective ways to get our economy moving again and will boost American competitiveness in the global
James Pinkerton, RATE co-chairman and former White House domestic policy adviser to Presidents Ronald Reagan and George H.W. Bush, said in the same statement, “We’re encouraged that both President Obama and members of Congress from both parties are making corporate tax rate reform a priority and serious reductions are being considered.” They recognize, he said, that “in order to help companies grow and expand within the United States, we need folks in Washington to make a commitment to reduce the current 35% corporate tax rate, which is the second highest in the world.”
The RATE Coalition laid out the following ways that it says reforming the corporate tax code creates jobs, decreases economic uncertainty and helps America regain its competitive edge:
- The U.S. and Japan have the highest corporate tax rates in the OECD. Between 2000 and 2011, the U.S. suffered a net loss of 46 Fortune Global 500 company headquarters. Japan lost a net of 39.
- Reducing the corporate tax rate to 25% would create an average of 581,000 jobs in the U.S. annually from 2011 to 2020.
- Reducing the U.S. statutory corporate tax rate to 25% (the average OECD rate) could boost GDP by 2.2% and increase employment by 2.13 million workers.
- The corporate income tax is the most harmful tax for long-term economic growth. A 2010 World Bank study demonstrated that corporate tax rates have a “large and significant adverse” effect on investment.