By Bernie Becker - 02/07/11 08:48 PM EST
The president noted that various deductions had caused some companies to pay drastically less in taxes than others. Meanwhile, the United States has a corporate tax rate (35 percent) that is expected to soon be the highest in the developed world.
“As a result, you got too many companies ending up making decisions based on what their tax director says instead of what their engineer designs or what their factories produce,” Obama said. “That puts our entire economy at a disadvantage. We need something smarter, something simpler, something fairer.”
The president added that the benefits of an overhauled tax code should be shared with workers and not merely translated to greater profits for businesses.
During his State of the Union address last month, the president also made a push for corporate tax reform, exhorting members of both parties to work to close loopholes to help reduce the corporate tax rate.
Republicans and Democrats have identified tax reform as an area of possible cooperation, with officials in both parties declaring that the current system hurts American businesses’ ability to compete.
Still, during his speech, Obama may have also underscored part of the difficulty of reforming the tax code, saying at one point that he had proposed “a bigger, permanent tax credit for all the research and development your companies do in this country.”
As The New York Times noted recently, tax breaks for research currently add up to roughly $8 billion. Some deductions are fairly popular — part of the reason that enacting a tax-reform package would appear to be a tough slog.
Another potential sticking point on tax reform is whether the corporate and individual tax codes should be tackled at the same time. The president mentioned both during his State of the Union, but at different times.
Lawmakers from both sides of the aisle – including Rep. Dave Camp (R-Mich.), chairman of the House Ways and Means Committee, and Sen. Ron Wyden (D-Ore.) – have called for a more comprehensive approach.
In a new op-ed in Politico, Wyden, a longtime supporter of tax reform, wrote that the focus should be on both codes, just as it was during the successful push for reform a quarter-century ago.
“Unlike health reform, there isn’t a single American who can say he or she likes the current tax code,” Wyden wrote.