Presidential candidate John Kerry, eager to rebut charges that he is a tax-and-spend Democrat, on Friday proposed cutting the corporate tax rate and paying for it by eliminating incentives for US companies to shift jobs overseas.
In Michigan, a battleground state hit hard by the flight of manufacturing to other countries and an unemployment rate of 6.6 percent - a full point above the national average - Kerry offered an economic trade-off he said would help create 10 million new jobs in four years.
He pledged to end a tax provision that lets companies defer paying US taxes on income earned by foreign subsidiaries and said he would use the $12 billion in annual savings to fully fund a 5 percent cut in corporate rates.
"Today we have a tax code that does more to reward companies for moving overseas than it does to reward them for creating jobs here in America," Kerry said in a speech at Wayne State University.
The proposal, one piece of a broader job-creation package to be unveiled over the next few weeks, amounted to "a simple tax cut" for the 99 percent of American companies that did not send jobs overseas, according to Kerry economic adviser Gene Sperling.
President George W. Bush and his Republican allies are portraying the four-term Massachusetts senator as one of the main opponents of tax relief in Congress ahead of the November 2 election.
"This is nothing but a reshuffling of the tax code and a political shell game," White House spokesman Scott McClellan said. "It can't erase the fact that John Kerry's record is one of raising taxes some 350 times."
CRITICISM FROM BIG COMPANIES: Kerry predicted criticism from America's biggest companies - the 1 percent that would pay higher taxes under his plan.
"I know how tough their lobbying will be and so do my colleagues in Congress," he said. "But I believe that's why we have elections in America - so that the people can set us on a new course."
Business analysts, economists and tax consultants questioned whether the policy would prevent many jobs from being moved to countries such as China and India, where wages are much lower.
John Castellani, president of the Business Roundtable, an organisation of influential executives, said Kerry's plan raised "a few concerns" because taxes were not the sole basis on which companies made decisions on where to put their facilities.
Kerry called his proposal the most sweeping reform of international tax law in 40 years. Sperling cited it as evidence that the senator "has always been a pro-growth, pro-jobs Democrat."
"Some may be surprised to hear a Democrat calling for lower corporate tax rates," Kerry said. "The fact is, I don't care about the old debates. I care about getting the job done and here in the United States of America."
Under existing law, US companies do not have to pay taxes on foreign income until they bring it back to the United States. If they keep it abroad, they can avoid taxes entirely.
Kerry's plan would tax profits from foreign subsidiaries just like domestic profits. It would still allow companies to defer the income earned by production overseas if they are serving foreign markets.
The $12 billion saved would pay for a cut in corporate tax rates, to 33.25 percent from 35 percent.
Kerry's plan would expand a proposal for manufacturing job tax credits to include industries that the Commerce and Labour Departments determined to be at risk of being outsourced.
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