WASHINGTON, Feb. 22 (UPI) -- The U.S. Treasury announced a tax overhaul proposal reducing the corporate rate and closing loopholes that favor large corporations.
The tax plan is meant to create jobs in the United States and keep corporations from shifting profits abroad, which allows them to dodge paying taxes to Washington, Treasury said.
"As I said in the State of the Union, it is time to stop rewarding businesses that ship jobs overseas, and start rewarding companies that create jobs right here in America," President Obama said in a statement.
He called the current corporate tax system "outdated, unfair, and inefficient."
A tax overhaul was required, "to make us more competitive and create jobs here at home," Treasury Secretary Tim Geithner said.
Giethner said the tax plan would "boost growth and provide American companies with incentives to invest in the United States while simplifying and cutting taxes for our small businesses."
Treasury said there were five "major elements" to the plan, including cutting the corporate tax rate from 35 percent to 28 percent while eliminating "dozens of tax loopholes and subsidies."
The plan is even more generous to manufacturing firms where the "effective rate (would be) ... no more than 25 percent," Treasury said.
Treasury did not spell out which loopholes the Obama administration was targeting.
Geithner told the Senate Finance Committee Feb. 14, "We're going to propose a broad reform that will lower rates, broaden the base and eliminate or wipe out ... dozens and dozens and dozens of special tax preferences for businesses."
Part of the plan is aimed at simplifying the code for smaller businesses -- those without platoons of lawyers at their disposal.
"Right now, companies get tax breaks for moving jobs and profits overseas," Obama said in his State of the Union address Jan. 24.
"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."
When he visited Master Lock Co. in Milwaukee last week, Obama called for tax cuts for U.S. manufacturers and higher taxes for companies that move overseas.
Obama said in his State of the Union speech it was time to end subsidies and tax breaks for the oil industry, which "rarely has been more profitable," and time to offer additional tax credits to companies developing alternative energy sources.
The top U.S. corporate-tax rate is 35 percent, among the world's highest, but many companies pay less due to credits, deductions, exclusions and exemptions, The Wall Street Journal said.
Geithner suggested last year the corporate-tax rate should move toward the "high 20s" from its current level.