(Bloomberg) — Treasury Secretary Jacob J. Lew said the tax system for businesses needs to be overhauled, with lower taxes and closed loopholes, to help boost the economy.
"The best way to achieve reform today is to start with pro-growth business tax reform that protects and strengthens the middle class, lowers rates, simplifies the system, levels the playing field, and eliminates unfair and inefficient loopholes," Lew said Wednesday in Washington after President Barack Obama laid out a plan in his State of the Union address last night. "We have a unique opportunity now to get this done."
While he said the entire tax system needs to be fixed, Lew focused on the administration's plan for reforming business taxes. In the speech, he called the current system "rife with industry-specific tax breaks and widely disparate effective tax rates from one sector to the next."
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Lew also criticized today's system as a barrier to business formation and too complicated, and said that it allows corporations to engage in corporate inversions — where they buy a company abroad to avoid paying taxes. That provision needs to be eliminated permanently, he said.
The president's plan would eliminate dozens of tax breaks and loopholes, and without adding to deficits, reduce the current top corporate tax rate to 28 percent from 35 percent, Lew said. It would lower tax rates for domestic manufacturing to 25 percent and make manufacturing incentives — such as the Research and Experimentation Tax Credit — permanent, he said.
The plan would also eliminate tax deductions that reward companies that shut down operations in the U.S. and relocate abroad, and would provide tax breaks for companies that bring production back to the U.S., Lew said.
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