BARACK OBAMA called on Congress immediately to overhaul the US corporate tax code as he laid out a $3.73 trillion (€2.76 trillion) budget request designed to improve America’s position in the global economy and start shrinking its large fiscal gap.
While signalling that tax reform could take several years, and was a painstakingly difficult process, the White House said it was necessary to transform a system that “makes our businesses and our economy less competitive as a whole”.
The budget proposal said the US should eliminate special tax breaks and loopholes and use the savings to lower the corporate tax rate from 35 per cent, one of the highest in the developed world.
But it said that any reform should not add to US budget deficits, which could prove a sticking point with the business community, and did not offer any additional insight into which corporate tax incentives the White House would like to see cut – beyond certain tax breaks for oil and gas companies.
Mr Obama’s budget request for 2012 shifts the policy agenda from stimulus measures to more targeted investment in certain areas, while striving to keep spending and budget deficits under control.
It proposes cutting deficits by $1.1 trillion over the next decade, achieving a temporarily sustainable debt-to-gross domestic product ratio of 3.2 per cent by 2015.
Eventually, however, America’s fiscal outlook would start deteriorating again because of the escalating costs of government pension and healthcare programmes, which are not tackled in any significant way in the budget.
The 216-page proposal marks the opening salvo in what is expected to be a series of fraught negotiations with congressional Republicans on budgetary matters. An extension of funding for the government is due in March, and an increase in the US debt limit, which is set by law, will need to be approved by the end of May.
Republicans, who are seeking much deeper cuts in discretionary spending and many government agencies, slammed the proposal.
Jim Jordan, head of the conservative Republican Study Committee in the House of Representatives, said: “Even as Americans are looking for Washington to cut back, President Obama wants to burden families and employers with higher taxes, more spending and more debt.”
In its budget, the Obama administration is seeking increases in funding levels for key agencies such as the Securities and Exchange Commission and the Commodity Futures Trading Commission charged with implementing last year’s financial regulatory reform.
But it is unclear whether these will be approved by Congress, since Republicans control the House of Representatives and opposed the Wall Street Bill.
