OPINION:
After two years of reading speeches and making vague promises, President Obama on Wednesday finally released a concrete tax proposal. His administration had intended to release this plan next week, but it saw the opportunity to upstage Mitt Romney by handing it out three hours before the GOP nomination hopeful could announce his own reforms. The Obama agenda isn’t convincing.
Mr. Obama says he would eliminate loopholes and subsidies in order to broaden the base and cut the top federal corporate rate from 35 percent to 28 percent. Mr. Romney proposes a more attractive 25 percent tax rate for businesses, which is equal to the average tax rate in the developed world.
Even so, the rate needs to go lower before we can compete in the global market. States tack an average 4.2 percent tax on corporate profits, driving the effective rate to 39.4 percent. To have a hope of enticing businesses to relocate from overseas, our federal tax rate shouldn’t exceed 20 percent.
Since more than half of small businesses file taxes as individuals, no corporate reform is complete without addressing income tax. Mr. Romney noted in Arizona that the White House hits small business by failing to reduce individual rates. “President Obama’s plan is to raise taxes on those enterprises,” said the former Massachusetts governor. “My plan is to lower it by 20 percent and put more people back to work.”
Alternatively, Mr. Obama wants the top rates to go up at the end of the year to 39.6 percent. Clearly, the former Bain Capital CEO has his eye on economic growth as he looks to bring the the highest individual income bracket closer in line with the corporate tax rate so all businesses are treated equally. Ultimately, these rates should be the same.
Also missing from this White House plan is any recognition of the need for America to shift from a worldwide to a territorial tax system. Corporate profits brought back to America from abroad are now taxed twice - first by the country where the company earned the money, then Uncle Sam taxes the difference. Because of this, U.S. companies have left more than $1 trillion in profits sitting overseas.
Mr. Romney advocates the necessary switch to the territorial system that taxes corporate earnings only in the country in which they were made, creating an incentive for the cash to flow back home to spur the economy and create jobs.
Mr. Obama is anxious to raise revenue so he can spend more, but a liberal can only go so far in calling for lower taxes. Mr. Obama never said a word in public about this tax reform. Instead, he put out a written statement and let Treasury Secretary Timothy F. Geithner announce the details at an off-camera briefing for reporters.
By contrast, Mr. Romney made his announcement to hundreds of people before a pack of TV cameras. Voters ought to evaluate both proposals, then consider who’s willing to look the public in the eye and commit to lowering their taxes.
Emily Miller is a senior editor for the Opinion pages at The Washington Times.
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