Obama, Romney duel on corporate tax plans

— -- President Obama and potential Republican challenger Mitt Romney proposed dueling corporate tax rate cuts, each saying they would help pay for cuts by eliminating spending and tax breaks that benefit the other party's constituencies.

The president's plan would cut the top corporate rate from 35% to 28%, while Romney would cut it to 25%. Romney also proposed slashing the top personal tax rate, now 35%, to 28%. Neither plan is likely to pass Congress in an election year, said Roberton Williams, a senior fellow at the Urban-Brookings Tax Policy Center in Washington.

Leaders of both parties argue that U.S. corporate taxes are higher than those of other Western nations, giving companies incentives to park profits abroad and move jobs.

Both say tax reform should get Washington out of the business of trying to shape the economy, eliminating loopholes that direct money to industries with political clout.

"None of these guys really believe that," said Howard Gleckman, a resident fellow at the Urban-Brookings Tax Policy Center. "They all have their favorite things they want to encourage, and they all use the tax code to do it. It's a Lake Wobegon world where all industries are above average."

The president's plan would:

•Help pay for the corporate tax cut by eliminating tax breaks Obama has asked Congress to repeal before, such as deductions for corporate aircraft and taxing private-equity fund managers' performance bonuses at the lower rates that otherwise apply to capital gains.

•Maintain or expand tax breaks to encourage manufacturing and renewable energy.

•Institute a minimum tax on U.S. companies' international earnings.

Romney's plan would:

•Convert Medicaid to a block grant program, switch Medicare from an entitlement to a "premium support" program to help future seniors buy insurance, and gradually raise the retirement age for Social Security. It would also repeal the 2010 health care reform law.

•Make permanent a tax credit for research and development spending, which Obama also proposed.

•Eliminate the inheritance tax and alternative-minimum tax, and keep taxes on dividends and capital gains lower than rates on income from salaries and wages.