WASHINGTON -- The Obama administration unveiled its framework Wednesday for overhauling the corporate tax code, offering an election-year proposal that would pay for a sharp reduction in the broad rate -- from 35 percent to 28 percent -- by taking away tax breaks enjoyed by the energy sector and big corporations.
Because prospects are slim for any comprehensive tax legislation before November's presidential election, the plan put forth by Treasury Secretary Timothy Geithner was as much about political choices as policy ones.
"The last time we fundamentally reformed the business tax code was more than 25 years ago. That was before the Internet, before cellphones, before the rise of China and other emerging markets ... and before a global trend to lower the corporate tax rates around the world," Geithner said at a news conference.
The U.S. tax code was last overhauled in 1986 and has been tinkered with constantly ever since.
The broad consensus is that the corporate tax code is antiquated and leaves U.S. companies at a disadvantage to foreign competitors.
What to do about it is a harder question. Although most corporations don't pay the highest nominal rates because they exploit tax credits, loopholes and deductions, corporate tax rates are unusually high.
Sounding a theme that President Barack Obama voices often, Geithner said the White House plan sought fairness and balance.
Under the current tax code, some industries do better than others. The goal, Geithner said, is to rebalance the code to be fairer to all.
Lowering the corporate tax rate from 35 percent -- among the highest globally -- to 28 percent would put it roughly in line with that of other major economies. Most lawmakers and business groups support that.
The administration gave no estimate of how much revenue it would cost the Treasury.
In a related development on the campaign trail Wednesday in Arizona, former Massachusetts Gov. Mitt Romney offered an economic recovery plan that included new tax details.
Romney proposed to cut the corporate tax rate to 25 percent. Like Obama, he'd make the research and development credit permanent. Romney also proposed lowering all individual income tax brackets, bringing the top bracket to 28 percent and the lowest to about 8 percent. He would also eliminate taxes on capital gains, interest income and dividends for families with annual incomes of less than $200,000.
Rather than closing tax loopholes for favored industries, Romney would offset lost revenue from his tax cuts by capping government spending at 20 percent of the nation's gross domestic product, down from 24 percent.
He estimated that would require $500 billion in spending cuts.