KAREN BLEIER/AFP/Getty Images(WASHINGTON) -- Arguing that the current corporate tax system hinders economic growth and job creation, President Obama Wednesday called for slashing the corporate tax rate from 35 to 28 percent by eliminating loopholes and subsidies.
“Our current corporate tax system is outdated, unfair, and inefficient. It provides tax breaks for moving jobs and profits overseas and hits companies that choose to stay in America with one of the highest tax rates in the world. It is unnecessarily complicated and forces America’s small businesses to spend countless hours and dollars filing their taxes. It’s not right, and it needs to change,” the president said in a written statement.
Obama’s proposed overhaul, announced by the Treasury Department, instead aims to simplify the corporate tax code and broaden the base. To pay for the cuts, the administration would do away with subsidies and loopholes that save companies billions of dollars each year, including those for oil and gas companies.
To encourage domestic investment, the White House plan would reduce the tax rate for manufacturers that create new products and produce goods in the U.S. to 25 percent and establish a minimum tax on foreign earnings.
“We want to restore a system in which American businesses succeed or fail based on the products they make and the services they provide, not on the creativity of their tax engineers or the lobbyists they hire,” Treasury Secretary Timothy Geithner told reporters Wednesday.
The administration’s framework is “fully paid for, and it won’t add a dime to the deficit,” Obama said.
While the election-year proposal puts the president at odds with Republicans vying for his position who would like to see lower corporate tax rates, both sides of the aisle on Capitol Hill have shown previous support for reducing corporate tax rates while eliminating special-interest loopholes.
Geithner said Wednesday that he has already been in contact with Senate Finance Committee Chair Max Baucus, D-Mont., and Rep. Dave Camp, R-Mich., chairman of the Ways and Means Committee. “We plan to meet, hopefully next week, to begin the process of building consensus, deciding how to move forward,” Geithner said.
Scott Eells/Bloomberg via Getty Images(NEW YORK) -- An encouraging housing report couldn't keep the markets in positive territory Wednesday. Investor concerns about the unstable financial situation in Europe pushed stocks down.
Stocks backtracked over concern about the outlook for Greece and the possible risk to the global economy. On Wednesday the Dow lost 27 points. The Nasdaq and S&P gave up 15 and 5 points, respectively.
The declines come a day after the Dow touched the 13,000 level for the first time since May of 2008.
Comstock/Thinkstock(WASHINGTON) -- Do credit card disclosures influence consumers’ financial behavior? And if so, do they influence it for the better or the worse? Both, a new study finds.
The Consumer Financial Protection Bureau meets Wednesday to discuss the credit card marketplace, a year after the effective date of many of the provisions of the Credit Card Accountability Responsibility and Disclosure Act (“CARD Act”). Those provisions include a requirement that lenders disclose to consumers on their monthly statements the difference in cost between making the minimum payment due versus some higher amount.
A study by the Harvard Business School addresses such disclosures; it finds they indeed affect consumer behavior, but not always in the way regulators might expect. The findings come from a non-controlled experiment involving 132,000 members of the Affinity Plus Federal Credit Union of Minnesota with a collective portfolio of some 30,000 credit cards.
In the experiment, card holders were given a disclosure explaining the difference in cost to them between paying the monthly minimum and the amount they would need to pay in order to retire their whole card balance in three years.
The sample disclosure showed that if they paid the minimum, it would cost them $6,534 over 14 years to pay off their balances, but that if they paid more ($147), it would cost them $5,297 (a savings of $1,237) over three years.
The results of the experiment were mixed.
Given the disclosure, more consumers opted to pay more than the minimum, and some of them, some of the time, chose to pay the 3-year payoff amount. But consumers who chose this option tended to be those with higher credit balances, those who paid more slowly and those with lower credit ratings. Even when paying the higher amount, they were consumers going ever more deeply into debt.
The reason, says Harvard professor Dennis Campbell, one of the study’s authors, is that lenders revise the 3-year amount with every monthly statement. “It’s a moving target,” he says. Not all consumers understand that.
“We can confidently say that more consumers paid the larger amount,” says Campbell. “But what type of disclosure is best is an open question.” A more useful disclosure, he suggests, might explain the fact that the 3-year target amount is being constantly reset, with the result that consumers who pay it will always be three years away from full repayment, never closer.
SAUL LOEB/AFP/Getty Images(WASHINGTON) -- In an election-year showdown likely to hinge on the economy, President Obama and his Republican rivals are all fashioning themselves as corporate tax slayers.
Obama on Wednesday unveiled his proposal to cut the corporate tax rate from 35 to 28 percent, ultimately higher than taxes under Mitt Romney’s plan, which would lower corporate rates drop to 25 percent.
The current nominal U.S. corporate tax rate -- 35 percent -- is the highest in the world behind Japan.
Rick Santorum, Ron Paul and Newt Gingrich say they would each make the statutory rate even lower -- slashing it to 17.5, 15 and 12.5 percent respectively.
But behind the top line numbers and a consensus that corporate rates are too high, differences in the fine print (or lack thereof) suggest bipartisan reform isn’t going anywhere fast.
Cutting corporate tax rates as proposed will require significant offsets to avoid blowing a hole in the federal budget, experts say. None of the candidates has fully or specifically articulated details on how their plans might address this.
The Obama administration claims it would, “eliminate dozens of tax loopholes and subsidies” to cover the cost, including those for oil companies, hedge fund managers and private equity firms, but doesn’t list precisely which ones.
Officials also say they would impose a new minimum tax on foreign earnings and end special preferences for companies that move work offshore, netting $250 billion more from corporations over the next 10 years.
That some corporations would end up paying more in taxes than they do now is a non-starter for many Republicans.
The Republican candidates, none of whom has advocated widespread elimination of loopholes or subsidies, favor extending additional tax credits to corporations. The offset would come on deep cuts in government spending, they say.
Romney advocates temporarily extending the investment tax credit and expensing allowance. He also favors a tax holiday for repatriation of foreign profits with an eventual elimination of the existing system.
Santorum also favors expanding the research and development tax credit from 14 to 20 percent and allowing all companies to fully expense investments in new equipment.
One tax policy priority that only Obama and Santorum have in common: special treatment in the corporate tax code for U.S. manufacturers.
Santorum wants companies that manufacture goods in America not to be taxed at all. Obama doesn’t go as far, but favors a special lower effective tax rate of 25 percent for manufacturers.
Stockbyte/Thinkstock(WASHINGTON) -- Existing home sales increased 4.3 percent in January, according to a report by the National Association of Realtors. Housing units were sold at a seasonally adjusted annual rate of 4.57 million units; a warm winter could have been one reason homebuyers jumped the gun on the usually busy spring real estate season.
The housing market has a long way to go before a full recovery. Home prices are still falling and foreclosure sales make up a large part of total sales.
Here are some positive signs from Wednesday’s report:
Sales of previously occupied homes rose to the highest pace in nearly two years.
The number of previously owned homes on the market dropped to 2.31 million, the fewest since March 2005. At the current sales pace, it would take 6.1 months to sell those houses, the lowest since April 2006. The glut of inventory has been a big problem in the housing market.
There has been an improvement in sales in three of the past four months.
Sales still remain well below normal pre-recession levels. Foreclosure-related sales were more than a third of the total.
KIMIHIRO HOSHINO/AFP/Getty Images(LOS ANGELES) -- Glasses that function like a smartphone? Google plans to introduce what appear to be the specs of the future by year’s end, The New York Times reports.
According to unnamed sources, which the Times described as Google employees, the glasses will be Android-based and include a small screen inches from the wearer’s eye. The glasses also will be sold to the public for $250 to $600.
“We are not going to comment on rumor or speculation,” a Google spokesman told ABC News via email.
The glasses will reportedly have a 3G or 4G connection, several sensors and a built-in camera to watch the world in real time and relay information about locations and friends nearby.
Seth Weintraub, a blogger for 9to5Google, reported on the glasses in December and February. Earlier this month, he reported that the display on the Google glasses would be on just one side and that the current navigation included head tilting in order to scroll and click.
Rob Enderle, the head tech analyst at his Enderle Group, said head-mounted displays like Google’s glasses had been in the market for years. He said, however, that earlier versions like a pair made by Sony nearly 10 years ago were $25,000, heavy and had a power supply five times that of today’s smartphone. In addition, many of them also put the computer screen directly in front of the wearer’s face, rendering one blind to the outside world.
“Google’s glasses are tied to something we call ‘augmented reality,’” Enderle told ABC News via email. “This takes virtual information and overlays it onto a real-world image.”
“This could allow you to see in the dark, pick out things like powerlines, for instance, if you were flying a helicopter low or see an approaching Starbucks long before you got clear line of site,” he said.
“I think this will be the most exciting technology product release this year,” Weintraub wrote.
Tomohiro Ohsumi/Bloomberg via Getty Images(WASHINGTON) -- Honda is recalling 45,747 Odyssey minivans due to a problem with the model’s liftgate.
“[T]he gas-filled struts that help to raise and support the liftgate of vehicles equipped with a power liftgate system may be prone to early life failures due to a manufacturing flaw,” Honda said in its recall notice. “The flaw can result in a leak of the pressurized gas, leading to reduced strut performance.”
The company says the potential malfunction -- affecting certain 2008-2009 models -- could cause the vehicle’s liftgate to close unexpectedly, posing a risk to those around it.
Honda says its dealers will fix the problem at no charge.
Justin Sullivan/Getty Images(REDMOND, Wash.) -- In an amusing viral marketing video, Microsoft has gone on the offensive, attacking Google Docs, the search giant’s collaborative, online word processing tools.
The video offensive is an effort to promote its own Office 365 service.
In the video -- set to a spoof of the song from the Bruce Willis comedy series Moonlighting -- Googen Apperson, a Google Docs salesman, tries to convince an executive to use the software in her organization. But she points out alleged flaws in the Docs service, including how it doesn’t work when you don’t have an Internet connection. She is interrupted when an R&B singer breaks into song about how Google killed off a number of services.
“Google killed of Gears and Wave/They buried to Buzz the same way/If Google Apps meets its grave, your business is hosed,” he sings.
Microsoft calls it Googlighting and explains in its accompanying blog post that it is, “what happens when the world’s largest advertising business tries to sell productivity software on the side.”
“If these concerns and current revelations about Google’s privacy policies have you troubled, this may be a great time to check out Office 365, the online collaboration solution for businesses who don’t want their documents and mail read,” the video states.
Microsoft has also called out Google for circumventing privacy policies. Google did not immediately respond to ABC News’ request for comment on the new video.
Alex Wong/Getty Images(WASHINGTON) -- The Obama administration is set to unveil a proposal on Wednesday that will call for lowering the country's corporate tax rate to 28 percent, a senior administration official tells ABC News.
Doing so would put the U.S. in line with its major competitors and encourage greater investment. At 35 percent, the nation's current corporate tax rate stands among the highest in the world.
The president's plan will also include cutting the effective rate on manufacturing to 25 percent, according to the official. Both deductions would be paid for by closing dozens of tax loopholes and eliminating subsidies.
Furthermore, the official says the proposal will introduce a minimum tax on foreign earnings to discourage moving jobs overseas.
Details of the plan will be announced Wednesday by the Treasury Department.
Comstock Images/Thinkstock(NEW YORK) -- If you converted a traditional IRA to a Roth IRA a few years back, get ready to pay the taxman.
In 2010, millions of Americans who wanted to convert their traditional IRA to a Roth were given a tax break; they were able to split the claimed income into two years -- 2011 and 2012. But now, the first half of that income needs to be claimed on returns filed this spring.
"People may have sometime taken an action in the prior year and then forgotten that they did that," says Kathy Pickering with H&R Block. "This is a great time to look back and say, 'Did we do that conversion? What's the income that I'm going to need to recognize? What are the taxes that I'm going to have to pay on that and do I have the money to pay those taxes?'"
And it could potentially be a lot of money -- a $100,000 conversion means taxpayers would have an extra $50,000 in income to report this year.
Taxes for new IRA conversions now have to be paid in the year of the conversion.
