(CNSNews.com) - After President Barack Obama unveiled his plan for corporate tax reform in a speech last week, the RATE Coalition and the Tax Foundation offered competing analyses, with the former praising the president’s proposal and the latter panning it as a "confused mix of policies" that will not have the desired effect on the U.S. economy.
Obama’s plan cuts the corporate tax rate from the current 35 percent to 28 percent (25 percent for manufacturers). It would also target internationally-held profits by U.S. companies and establish a minimum tax rate for companies that operate overseas.
"We applaud the President's support of revenue-neutral corporate tax reform that will bring our corporate tax rate more in line with our global competitors. His call to reduce the corporate tax rate is a solid step in the right direction," RATE Coalition co-chairs Elaine Kamarck, a former White House advisor to President Bill Clinton, and James Pinkerton, a former domestic policy advisor to Presidents Ronald Reagan and George H.W. Bush, said in a statement.
The RATE Coalition is made up of 32 companies and organizations such as AT&T, Ford, and Time Warner Cable. The group's mission is "to reform the tax code, making it fairer and simpler and improving the prospects of growth and jobs in the U.S. economy by reducing the corporate income tax rate to make it more competitive with our nation’s major trading partners."
"The President knows our current (tax) code is out of step with our trading partners, resulting in jobs being lost overseas," said the group's statement, which did not include any quantitative data or research.
In contrast, the Tax Foundation criticized the president’s plan, pointing to results from its "dynamic growth model" that found that the U.S. Gross Domestic Product (GDP) would grow by over 2 percent and wages would also increase by nearly 2 percent annually if the corporate tax rate were lowered to 25 percent with "no offsetting changes in other provisions."
Because the end result would be an increase in federal tax revenues, the foundation concluded that there is no need to increase taxes.
Foundation President Scott Hodge, a former director of tax and budget policy at Citizens for a Sound Economy, added that while President Obama has been correct in pointing out that the U.S. needs to lower its corporate tax rate, which is the highest in the world, "this plan is the attempt to combine a vital reform like lowering the corporate rate with billions more in federal spending to provide a temporary jobs stimulus.
"Improving the corporate tax code with one hand while placing extra burdens on U.S. companies with the other is not going to lead to the increase in jobs and economic growth we need," Hodge said in a statement.
"When it comes to the corporate tax code, there are two major changes that will stimulate investment and lead to greater economic growth. One, as the President has acknowledged, is cutting the corporate rate. The other, which he seems dead set against, is to follow the lead of our major trading partners and only tax corporate profits that are earned in this country," Hodge noted.
Founded in 1937, the Tax Foundation "is the nation’s leading independent, non-partisan organization providing sound research and analysis on federal and state tax policy."