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Obama Includes Corporate Tax Overhaul in Fiscal Cliff Offer

The White House deficit reduction plan sent to House Republicans this week included a proposal to accelerate an overhaul of the corporate tax system as part of a larger agreement, according to a person familiar with negotiations between President Barack Obama and House Speaker John A. Boehner.

The corporate tax plan was part of the larger package that included $1.4 trillion in new tax revenue, which was reduced from the initial White House offer of $1.6 trillion, according to GOP sources in the House.

Details about the corporate tax proposal were not disclosed, but the administration has previously offered a blueprint for a tax code rewrite that would reduce the corporate tax rate from 35 percent to 28 percent.

Although the administration has not offered specific details about how it would pay for the rate reduction, it has put forward several options, including scaling back the system in which businesses can deduct assets at an accelerated rate and by limiting the deductibility of interest. Both changes would have a significant impact on a wide range of industries.

Before this latest development in the talks of the looming fiscal cliff, which includes tax increases and automatic spending cuts, Obama had not offered a timetable for when he planned to tackle a corporate tax overhaul, suggesting only that it was something that he would like to accomplish in his second term. Offering to undertake a tax code rewrite in 2013 comes as the White House is trying to win over business groups to its vision of a fiscal cliff solution as the administration tries to convince Republicans to accept tax rate increases on high-income earners.

Michael Steel, a spokesman for Boehner, R-Ohio, dismissed the White House proposal disclosed Tuesday evening, referring back to criticisms of the administration’s blueprint that Republicans offered when it was first introduced in February.

A proposal to reduce the corporate tax rate is a “red herring,” Steel said, because many small businesses don’t pay the corporate tax but benefit from tax breaks that could be eliminated under the administration’s plan.

Boehner declined comment on negotiations with the White House as he left his office Tuesday night.

Pat Tiberi, R-Ohio, a senior tax writer, said Obama had moved the revenue target to $1.4 trillion but had not given enough either in terms of reducing that number or making specific spending cut proposals.

“The difficulty the speaker is having is he understands something has to get done, but the president has to give something on spending. That’s the problem, on spending,” Tiberi said. “Right now, (Obama is saying), ‘Let’s increase the revenue, let’s spend more, and we’ll talk about spending cuts later.’ Nobody believes that later will come.”

Alan K. Ota contributed to this report.

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