2/22/2012 1:45 PM ET
(RTTNews) - Treasury Secretary Timothy Geithner Wednesday unveiled the Obama Administration's plan to reform the corporate tax code to promote economic growth in the United States.
Geithner, speaking to reporters at the Treasury Department, said that the present tax code was written for a different economic era and needs to be modernized.
The broad outline of the plan is to eliminate existing short-term tax breaks while lowering the overall business tax rate, though Geithner did say President Barack Obama does want to see some more permanent tax breaks, especially to support manufacturing in the United States.
The reformed tax code, Geithner said, should provide "strong incentives to encourage companies to create and build things in America."
The framework released Wednesday, Geithner said, was a starting point for discussions with Congress to build a consensus around reforms to the tax code.
As part of the administration's proposal, many tax loopholes would be eliminated in order to lower the overall corporate tax rate to 28 percent.
It would also refocus the manufacturing tax rate with a goal of bringing the effective tax rate on manufacturers down to 25 percent, with additional incentives for research and development in the field of clean energy.
The proposal also suggests simplifying and cutting taxes for small businesses so they can focus on innovation and growth rather than the difficulties of filing their taxes.
Even so, Geithner said, "the President believes that tax reform has to be done in a fiscally responsible way" so as not to add to future deficits. "Tax reform can help economic growth, but tax cuts do not pay for themselves."
He added that the aim was to ensure any future tax breaks were "better targeted and more effective."
Geithner acknowledged that the process of reforming the corporate tax code would be politically contentious.
"Some will say these proposals are too tough on business, and others will say that they're not tough enough," he said. "Many will fight to preserve specific tax preferences and subsidies, but every preference Congress preserves for some requires the rest of America's businesses to pay a higher rate."
He added, "A long-term growth strategy for the United States requires tax reform."
Geithner also noted that tax reform alone would not be enough to ensure that America can compete with the growing emerging economies around the globe.
"The rising fortunes of emerging economies offer tremendous economic opportunities for the United States," he said. "If we are going to be able to take advantage of those opportunities, we have to encourage companies—American companies and foreign companies—to design, create, and build things here in the United States."
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