SUSIE GHARIB: Making American companies more competitive and bringing jobs back home. That`s why the Obama administration wants to overhaul the corporate tax code. Today`s proposal closes many loopholes and eliminates tax breaks for oil and gas producers. It also cuts the effective corporate tax rate on manufacturers to no more than 25 percent and drops the top corporate tax rate from 35 percent to 28 percent. But, as Darren Gersh reports, one of the administration`s most controversial ideas is a minimum tax on the profits U.S. companies make overseas.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: The White House argues the president`s push for a minimum tax on overseas corporate profits will help level the international playing field, leading to a tax code that supports manufacturing at home.
JAY CARNEY, WHITE HOUSE SPOKESMAN: That takes away the incentive for companies to relocate overseas and reverses that and creates incentives for companies to in source again in the United States — a trend that the president believes is very important to our economic future.
GERSH: Under current law, U.S. companies can put off paying taxes on their overseas profits until they bring that money back to the United States. In practice, that means a lot of the overseas profits U.S. companies make are never taxed. Even so, Alex Brill, an economist at the American Enterprise Institute, thinks the minimum tax is a mistake. He says the tax code should make it easy for businesses to invest wherever they need to, at home or abroad. If U.S. businesses do well overseas, Brill says they will have more resources to invest everywhere.
ALEX BRILL, RESEARCH FELLOW, AMERICAN ENTERPRISE INSTITUTE: Ultimately, that`s going to result in more manufacturing jobs, more
research jobs, more accounting jobs, here in the United States.
GERSH: There is growing bipartisan agreement on Capitol Hill that the U.S. needs to lower its corporate tax rate to keep up with other countries that have been lowering rates on corporate profits. Deloitte tax expert Clint Stretch says the president`s minimum tax sends the wrong message to the most competitive U.S. companies.
CLINT STRETCH, MANAGING PRINCIPAL, DELOITTE TAX: They care about where they`re taxed and how much they`re taxed. And the president has really moved in the opposite direction where the political conversation`s been going. So, it`s going to give them pause.
GERSH: Which may explain the cool reception the president`s tax framework received from business today. The administration crafted its plan to guarantee manufacturers operating at home face an effective tax rate of no more than 25 percent. But even manufacturers were not happy with that.
JAY TIMMONS, PRES.& CEO, NATIONAL ASSOC. OF MANUFACTURERS: The president recommends that manufacturing be at a 25 percent rate and that`s average. I don`t think we`ve become the great country we are today because we`ve strived to be average. I think we`ve got to come down much farther. We have to pick a rate that makes us competitive around the world.
GERSH: The White House has not said where it wants to set the minimum tax on overseas profits. Senior administration officials described the president`s proposal as a framework to start negotiations. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.