By Bernie Becker - 01/26/11 01:37 AM EST
President Obama called for an overhaul of the corporate tax code in his State of the Union address on Tuesday night. – and gave a nod to the individual tax code as well.
Obama said the current corporate code is hurting American companies that are trying to compete and called on members of both parties to hammer out the first major tax reform since 1986.
“Over the years, a parade of lobbyists has rigged the tax code to benefit particular companies and industries,” Obama said. “Those with accountants or lawyers to work the system can end up paying no taxes at all. But all the rest are hit with one of the highest corporate tax rates in the world. It makes no sense, and it has to change.
“So tonight, I’m asking Democrats and Republicans to simplify the system,” the president added. “Get rid of the loopholes. Level the playing field. And use the savings to lower the corporate tax rate for the first time in 25 years – without adding to our deficit.”
In fact, both Republicans and Democrats have said that tax reform is an area where the two parties could find some common ground. But officials on both sides of the aisle have also said that finding an agreement on the tax code could be a long, complicated process – and that last phrase from the president (“without adding to our deficit”) could turn out to be a sticking point in the debate.
At a House Ways and Means hearing last week, Robert McDonald, the chief executive of Procter & Gamble, said the business community was asking to ensure an overhaul of the corporate tax code helped American businesses compete – and not to worry at first whether it was revenue-neutral.
Obama also called for a simpler tax code for individuals as well. Overhauling the individual code, Obama said, “will be a tough job, but members of both parties have expressed interest in doing this, and I am prepared to join them.” Key lawmakers from both parties -- including Rep. Dave Camp (R-Mich.), the chairman of the House Ways and Means Committee, and Sen. Ron WydenRon WydenOvernight Finance: McConnell offers 'clean' funding bill | Dems pan proposal | Flint aid, internet measure not included | More heat for Wells Fargo | New concerns on investor visas US wins aerospace subsidies trade case over the EU Wells CEO Stumpf resigns from Fed advisory panel MORE (D-Ore.) -- have called for tax reform that deals with both the business and individual rates. But there has been some question about whether the White House was more interested in the corporate code.
Obama also used the State of the Union to start the next debate over extending the Bush-era tax cuts for the wealthy – even though those rates were just extended weeks ago for two more years.
In the speech, the president said that – if the deficit really is a top priority -- the cuts for the wealthiest should not be permanently extended.
“Before we take money away from our schools, or scholarships away from our students, we should ask millionaires to give up their tax break,” the president said. “It’s not a matter of punishing their success. It’s about promoting America’s success.