President Obama with Vice President Biden (Susan Walsh/AP)
Obama 's proposal would overhaul the corporate tax code with the goal of encouraging job creation and investment in the U.S., and reducing tax incentives for shifting operations overseas.
"We want to restore a system in which American businesses succeed or fail based on the products they make and the services they provide," Treasury Secretary Tim Geithner told reporters in a briefing Wednesday morning, "not on the creativity of their tax engineers, or the lobbyists they hire."
The proposal offered by Romney -- who, despite some recent stumbles, is still seen as the likeliest Republican nominee -- is even more sweeping: It cuts and revamps both individual and corporate taxes, and calls for shrinking the size of government.
The Obama administration's plan, which requires congressional approval, would cut the corporate tax rate from 35 percent to 28 percent, with manufacturers receiving preferences that would allow them pay an effective rate of 25 percent, Geithner said. (The White House recently launched a push to encourage domestic manufacturing.)
The plan also would use the tax code to promote research and development, and clean energy. But it would not address the individual income tax -- an area of the tax code that Republicans in particular have stressed the need to refashion.
To avoid reducing the amount of revenue taken in, the administration proposes to eliminate dozens of tax breaks and deductions that currently encourage companies to invest overseas. The plan also would establish a minimum tax on the foreign earnings of multinational corporations.
"It has to be fiscally responsible," a senior administration official told reporters. "It can't add to future deficits."
The administration acknowledged that many of the plan's details -- in particular, the specific tax breaks and loopholes that would be eliminated, and how much would be saved by doing so -- would be worked out by Congress.
"It's a framework," the senior administration official said of the Obama plan. "And the framework is a set of things that reform should achieve."
No one expects the plan to move swiftly through Congress -- especially in an election year. "This process is going to take some time," Geithner said. "It's going to be politically contentious."
The current 35 percent corporate tax rate is among the highest in the world. But thanks to tax breaks and loopholes, many corporations pay a much lower effective rate. General Electric reportedly paid no taxes in 2010. The administration has long been planning an overhaul of the corporate tax code -- a project that most tax experts of all political stripes see as crucial for improving U.S. competitiveness.
Several Republican presidential candidates have advocated more dramatic cuts to the corporate tax rate. Although a nonpartisan congressional analysis released in November found that the rate could not be set lower than 28 percent without widening the deficit (pdf), even if every corporate tax break were scrapped, congressional Republicans have challenged that finding.
The GOP was quick to criticize the administration's plan, seizing on the decision not to address individual income tax rates.
"Genuine tax reform is necessary, and should be about creating a fairer, flatter tax code," Don Stewart, the communications director for Senate Republican Leader Mitch McConnell, told Yahoo News. "Individual tax reform should be part of this effort, to ensure that our small businesses don't see a massive tax hike right after the election."
The centerpiece of Romney's plan -- which follows up on a 59-point economic plan the candidate released last September -- is an across-the-board 20 percent cut in marginal income tax rates, establishing a new top rate of 28 percent, down from 35 percent.
Reiterating an item from last year's plan, Romney also would eliminate the capital gains tax for households making $200,000 or less, though he would keep it at 15 percent for the richest Americans. And he'd repeal the Alternative Minimum Tax, which was originally intended to target the very rich but, many analysts argue, now ensnares too many middle-income families.
Romney would cut the corporate tax rate to 25 percent in order to "put American companies on a level playing field," as his campaign website puts it.
To pay for the tax cuts, Romney would reduce the size of government to 20 percent of GDP by 2016. But his campaign hasn't released specifics on where those cuts would come from. "What the government needs to do, it should do more effectively," the plan says.
On a conference call with reporters Wednesday afternoon, Glenn Hubbard, a top economic adviser to the Romney campaign, described the plan as "a very significant pro-growth tax policy," adding that by reducing the deficit it "creates a sense of stability and certainty."
In touting his plan on the campaign trail Wednesday, Romney seemed to signal a shift in his political rhetoric. He said he wanted to cut back on deductions that benefit high income Americans, "so we make sure the top 1% keeps paying, paying the current share they're paying or more." Back in January, Romney castigated Obama for "encouraging the idea of dividing America based on 99 percent versus one percent."
Romney will deliver a speech on his plan at the Detroit Economic Club Friday.
This isn't the first time that Obama and Romney have seemed to jockey for advantage as they unveiled competing economic proposals. Romney released his 59-point jobs plan two days before Obama gave a speech before Congress laying out his own job-creation ideas.
Olivier Knox contributed reporting to this story.
More popular Yahoo! News stories:
Want more of our best political stories? Visit The Ticket or connect with us on Facebook, follow us on Twitter, or add us on Tumblr. Handy with a camera? Join our Election 2012 Flickr group to submit your photos of the campaign in action.
- Mitt Romney
- President Obama
- corporate tax