Obama administration unveils corporate tax plan to close loopholes, lower rate to 28 percent

Feb. 16, 2012: Treasury Secretary Timothy Geithner testifies on Capitol Hill in Washington. (AP)

The Obama administration on Wednesday unveiled its corporate tax reform plan, calling for lowering the corporate rate from 35 to 28 percent while closing loopholes elsewhere.

Officials billed the proposed changes as a way to make America more attractive to businesses while also raising revenue for the government

"It's a framework that lowers the corporate tax rate and broadens the tax base in order to increase competitiveness for companies across the nation," Obama said in a written statement. He added: "This reform is fully paid for, and it won't add a dime to the deficit."

Officials have said the reforms would actually raise money, despite the decrease in the rate, by making changes to provisions which Treasury Secretary Tim Geithner called "fundamentally unfair." The plan aims to raise $250 billion over 10 years.

Manufacturers would receive incentives so that their effective tax rate would be 25 percent. But corporations with overseas operations would also face a minimum tax on their foreign earnings, while taxes on oil and gas companies would reportedly see their taxes go up while losing many large deductions and subsidies.

Geithner, who unveiled the details publicly on Wednesday, said the current code is bad for business, claiming the overhaul would make the system more globally competitive.

"Our tax system should not give companies an incentive to locate production overseas or engage in accounting games to shift profits abroad, eroding the U.S. tax base. Introducing the principle of a minimum tax on foreign earnings would help address these problems and discourage a global race to the bottom in tax rates," reads an outline provided by a senior administration official.

The outline says the manufacturing deduction -- emphasizing clean energy research and development -- would reduce the effective rate on manufacturing to no more than 25 percent.

Rep. Dave Camp, R-Mich., chairman of the House Ways and Means Committee, applauded the president for his overall goal of lowering rates and closing loopholes. However, he said the "corporate-only" plan "fails to address the need for comprehensive reform of our tax code." Urging the president to "keep going," he said the administration would find a "ready and willing partner" in House Republicans when it comes to pro-growth tax reform.

Sen. Orrin Hatch, R-Utah, ranking member on the Senate Finance Committee, made clear Wednesday he was not impressed. He complained that the new plan lacked detail.

"I'd hoped the White House would recognize the severity of the problem with a real plan and real leadership. But, after months of promises, we instead got a set of bullet points designed more for the campaign trail than an actual blueprint for fixing our tax code," Hatch said in a statement. "The devil's in the details when it comes to reforming our tax system -- details that are sorely missing in what was released today. Unfortunately, this so-called framework is murky, ill-defined and contradictory to the goal of reducing complexity and making our tax code more efficient."

Despite Hatch's concerns, the announcement Wednesday at the Treasury Department was meant to fill in details of the tax reform outline Obama gave during his State of the Union address.

The president said at the time he wants to lower the overall corporate tax rate "for the first time in 25 years." The U.S. corporate rate of 35 percent is one of the highest in the world.

The White House is calling for more "fairness" and "simplicity" in the system, and in a bid to move companies back to the U.S., it would seek a minimum tax on global profits. Currently, many corporations do not invest overseas profits in the United States to avoid the 35 percent tax rate.

Geithner told a House committee last week that the administration wants to create more incentives for corporations to invest in the United States. While the rate itself may be among the highest in the world. Geithner argued that the effective rate is much lower because of all the loopholes in the system.

"We want to bring down the rate, and we think we can, to a level that's closer to the average of that of our major competitors," Geithner told the House Ways and Means Committee.

During his State of the Union address, Obama pitched the tax reform as a way to "knock down barriers that stand in the way" of economic success.

He described the tax code as the product of a "parade of lobbyists" rigging the system.

"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," Obama said in January. He urged Congress to "simplify" the system, get rid of loopholes and use the savings to lower the corporate rate.

Many members of both parties have said they favor overhauling the nation's individual and corporate tax systems, which they complain have rates that are too high and are riddled with too many deductions.

The corporate tax debate has also become an element of presidential politics. Republican presidential candidate Mitt Romney has called for a 25 percent rate while former House Speaker Newt Gingrich has said he would cut the corporate tax rate to 12.5 percent, and Rick Santorum called for exempting domestic manufacturers from the corporate tax and halve the top rate for other businesses.

Fox News' Ed Henry and The Associated Press and The Wall Street Journal contributed to this report.