- By
- PETER NICHOLAS
- and
- JOHN MCKINNON
Mr. Obama will lay out the plan in a speech he is to deliver in Chattanooga, Tenn., in a bid to win over Republican lawmakers who've opposed White House requests for new spending on roads and bridges and other projects aimed at boosting employment.
European Pressphoto AgencyPresident Obama spoke in Jacksonville, Fla., Thursday as part of a series of speeches about job creation and the economy.
The deal is part of a renewed White House effort to jumpstart its domestic agenda and focus attention on jobs and the economy.
Last week, Mr. Obama began a series of speeches devoted to the theme that Washington needs to take more aggressive steps to shore up the middle class and to boost long-term economic growth. He is also rethinking his strategy for motivating Congress to act. In today's speech, his aim is to entice Republican lawmakers to agree to jobs proposals he has long advocated in exchange for business tax reductions that are important to the GOP's political base.
"As part of his efforts to focus Washington on the middle class, today in Tennessee the president will call on Washington to work on a grand bargain focused on middle class jobs by pairing reform of the business tax code with a significant investment in middle class jobs," said Dan Pfeiffer, senior adviser to the president.
In the past, Mr. Obama has said he would agree to reduce corporate tax rates only as part of a larger plan that would revamp the tax code for individuals, end tax advantages benefiting wealthier Americans and apply the proceeds to deficit reduction.
With no breakthrough in sight, Mr. Obama is dropping his insistence that individual tax rates be part of the package, so long as Republicans agree to plow one-time proceeds from the corporate tax overhaul into measures that Mr. Obama says would lift wages and create jobs, White House officials said.
They did not provide an estimate of the windfall's size.
Many Republicans say that any new revenues from a tax code overhaul must be devoted to covering the cost of lowering tax rates. The White House made clear that if Republicans held to that position and opposed funding for jobs programs, Mr. Obama would not go along.
In past years, the Obama administration has put forward business tax plans that would reduce the top rate from 35% to 28%, end certain tax advantages, cut the rate on manufacturers to 25% and impose a minimum tax on foreign earnings, among other measures. The changes would be deficit-neutral. They would also pay for certain business tax breaks that get extended each year but aren't offset with other budget changes.
The GOP has proposed changes to offset the cost of lowering rates to 25%.
Mr. Obama's proposal appears to open the door to raising revenue on a one-time basis from several sources in the tax code.
One is the international area. Currently U.S. businesses can largely avoid federal taxation on their overseas earnings, as long as they don't bring the money back to the U.S. As a result, American companies have built up large stockpiles of cash offshore. They also have invested heavily in offshore assets, such as foreign businesses.
Moody's Investor Service in a March report said the U.S. companies it rates held $1.32 trillion in cash and estimated that 58%, or $840 billion, was held overseas.
A number of proposals in Congress would change that in the short term, allowing businesses to pay a special, low tax rate on the profits that are trapped offshore and encouraging the companies to bring more of them back home.
Most often those proposals are part of a broader plan to eventually end the U.S. tax on overseas profits. That would put the U.S. in line with most other developed countries, which seek to tax only domestic profits.
An administration official cited this area as one likely to be targeted by Mr. Obama as part of his new proposal.
Another possible change would raise revenue by slowing the rate at which businesses can depreciate plant and equipment. Businesses likely would still get the full depreciation, just over a longer period of time.
Still another possibility is doing away with a system of accounting for inventory, known as "last in, first out."
Any White House proposal to rework the tax treatment of multinationals could mobilize armies of lobbyists and chief executives, as corporations have much to win or lose based on how the system is redrawn. Large corporations, including Microsoft Corp., General Electric Co., and the Walt Disney Co., have already been engaged on Capitol Hill talks, and the White House's push could spike interest.
The White House proposal could draw from earlier initiatives that fell flat with Congress. One prior proposal to tax foreign profits - or make it harder for companies to shift profits overseas - could bring in between $8 billion and $15 billion in a year, according to White House estimates. Another prior White House proposal, which would eliminate the "last in, first out" accounting method used by some businesses, would bring in between $3 billion and $8 billion, depending on how it was phased in.
One of the thorniest elements of any corporate tax code overhaul would be determining which tax breaks would be eliminated in order to pay for reducing the tax rate from 35% to 28%. Many of the largest tax breaks are very popular with an assortment of industries.
—Damian Paletta and Kate Linebaugh contributed to this article.Write to Peter Nicholas at [email protected] and John McKinnon at [email protected]
