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Kerry calls for broad revision in corporate taxes

John Kerry proposed Friday to create 10 million jobs and eliminate tax loopholes that push jobs overseas while cutting corporate taxes by 5 percent.
/ Source: The Associated Press

Democratic presidential candidate John Kerry proposed Friday to create 10 million jobs and eliminate tax loopholes that push jobs overseas while cutting corporate taxes by 5 percent.

“Some may be surprised to hear a Democrat calling for lower corporate tax rates,” Kerry told an audience at Wayne State University. “The fact is, I don’t care about the old debates. I care about getting the job done and creating jobs here in the United States of America.”

Kerry, who overrode the objections of some advisers who opposed the corporate tax cut on political grounds, said he would fight a reluctant Congress and special interests to push through his program.

“Time after time, [the Bush] administration has put ideology first and jobs last. Today, I’m announcing a new economic plan for America that will put jobs first,” said Kerry, a senator from Massachusetts.

The plan would face a series of obstacles should Kerry defeat President Bush in November, starting with politically powerful corporations that benefit from the overseas tax breaks he wants to scrap.

Second-guessing by Democrats possible
Kerry also could be second-guessed by Democrats who would prefer to transfer the savings from his plan to more targeted jobs initiatives or programs that benefit middle-class voters.

But he settled on a combination of loophole-cutting populism and business-friendly moderation, casting his package as jobs-producing tax reform. Polls show that jobs are the top issue with most voters and that Kerry is viewed as best suited to improve the economy; terrorism is No. 2, and most voters say they trust Bush most to protect the nation.

White House press secretary Scott McClellan dismissed Kerry’s proposal as a “shell game” that he said would not address the issue of jobs’ going overseas.

“This is nothing but a reshuffling of the tax code and a political shell game and can’t erase the fact that John Kerry’s record is one of raising taxes some 350 times,” McClellan said.

First plank of Kerry’s economic platform
The new initiative, which Kerry said would pay for itself, is part of his overall economic plan to lower the cost of health care and energy, increase investment in education and reduce the federal deficit. Kerry has not fleshed out the cost or other details of his overall spending, but the Bush campaign has made a series of assumptions to conclude that he would need to raise taxes by at least $900 billion, a calculation the Kerry campaign disputes.

Kerry unveiled the first plank of his economic package in Michigan, a politically important state where 6.6 percent of workers are unemployed. Many of the jobs moved abroad.

“We now have a tax code that has American taxpayers paying to ship jobs overseas,” Kerry said. “That makes no sense. And if I am president, it will end.”

Current tax laws allow U.S. companies to defer paying taxes on income earned by their foreign subsidiaries until they bring it back to the United States. If they keep the money abroad, they avoid paying U.S. taxes entirely.

Kerry would require companies to pay taxes on their international income as they earn it rather than being allow to defer it. The new system would apply to profits earned in future years only, not retroactively.

He also would allow companies to defer taxes when they located a business in a foreign country that served that nation’s markets. A U.S. company seeking the tax break could open a car factory in India to sell cars in India, for example, but it could not relocate abroad to sell cars back to the United States or Canada.

Kerry’s campaign estimates that the change would save $12 billion a year. The savings would be used to reduce the corporate tax rate from 35 percent to 33.25 percent, a reduction of 5 percent.

More than 99 percent of companies that pay corporate taxes would get lower tax bills, the campaign said. But the 1 percent that pay higher taxes are some of the nation’s biggest and most powerful.