As with personal taxes, both candidates start with a mantra of "lower rates" for corporations. But at a time when nations around the world have been competing to offer the most business-friendly climate, their approaches to spurring job creation through the tax code differ sharply.
Obama would reduce the top corporate rate to 28 percent from 35 percent. New carrots and sticks would be designed to encourage investment at home and discourage offshoring of jobs and factories. A corporation's profits from foreign subsidiaries would face a minimum tax rate, with US taxes tacked on if taxes in the host nation don't hit the bar by themselves. (Currently that happens only when a corporation decides to "repatriate" profits, or move them from the host country back to the US. That encourages firms to invest their foreign profits overseas.) Obama would then offer businesses a tax credit to move operations to the US, while tax deductions for shifting operations abroad would be eliminated. Overall, his vision is for the corporate-tax overhaul to be revenue-neutral for the government.
Romney would cut the top corporate rate to 25 percent. And he would seek to encourage domestic investment by opening the door to firms that want to repatriate their profits. This is called a "territorial system,” because once you pay taxes on a subsidiary in its host nation, you're done. You can move profits back to the US without further tax. Romney says that 26 of 34 advanced nations in the Organization for Cooperation and Development have a territorial system or something close.
Critics of the territorial approach say it's a giveaway to multinational corporations, at a time when the US sorely needs more tax revenue, and that it will do little to lure jobs back to the US. But others criticize Obama's minimum tax, saying that instead of encouraging domestic job creation, it will drive companies to opt for foreign rather than US ownership.
