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Obama, Romney offer tax plans; both lower corporate rate

President Obama and Republican presidential contender Mitt Romney offered competing proposals Wednesday for how the government should tax citizens and companies, previewing the ideological clash over taxes that is likely to be at the forefront of the election campaign.

Obama released a long-awaited plan to overhaul the nation's corporate tax code that plays directly to his base, following his call earlier this month for significant tax hikes on the wealthiest Americans.

The new plan would lower the nation's corporate tax rate to 28 percent from 35 percent. The proposal would also raise the taxes of Democratic bogeymen, including oil and gas companies and multinationals that create jobs overseas, to pay for the reduction in the overall corporate rate.

Shortly after Obama released his plan, Romney unveiled a series of deep cuts in personal and corporate income tax rates, the kind of reductions that have become a tenet of Republican economic thinking.

The former Massachusetts governor proposed reducing the rates for individual taxpayers by a fifth, meaning that top earners would pay 28 percent of their income in taxes, compared with 35 percent today. He also suggested taxing corporate profits at a rate of 25 percent.

The topic of corporate taxes is particularly relevant now because right after the election, Obama or his Republican successor will have to decide whether to increase taxes to avoid imminent and deep cuts in domestic and defense spending. The next president will also face longer-term questions about how to pay for the nation's fast-rising entitlement costs.

Despite their differences, the dueling proposals shared certain features. They were both short on specifics -- in particular, details about which taxpayers would have to pay more to offset the reduction in overall rates. In addition, Obama and Romney each sought to inoculate himself against the other's criticisms.

With his plan to reduce corporate tax rates, Obama is trying to to seem business-friendly, with an eye to bolstering American competitiveness.

"Our business tax system today is bad for economic growth and job creation in the United States," Treasury Secretary Timothy Geithner said.

Romney, meanwhile, is trying not to look as if he wants to cut taxes for the rich. He said Wednesday that he would eliminate taxes on capital gains and dividends only for people making $200,000 or less and that those making more than $200,000 would face limits on their deductions for items such as charitable contributions.

"I'm going to limit the deductions and exemptions particularly for the higher-income folks," Romney said.

Obama has already called for increasing the maximum tax rate for people making more than $250,000 a year to 39.6 percent and a special minimum tax for people who make more than $1 million per year.

Democrats gave mixed reviews to Obama's latest plan. Senate Finance Committee Chairman Max Baucus, D-Mont., said the proposal "helps advance the discussion on tax reform," but he added that "there is certainly more work to be done."

Republicans, too, were divided. Some said it was not a serious effort and lacked crucial details, while others welcomed the administration's decision to discuss tax policy.

Romney's tax plan is aimed in part at beating back the primary challenge from his right by former Sen. Rick Santorum, R-Pa.

But Santorum belittled Romney's proposal, saying it copied his own tax ideas. "Welcome to the party, governor," he said at a rally in Tucson, Ariz.