Obama proposes to cut corporate tax rate to 28 pct

"Our business tax system today is bad for economic growth and job creation in the United States," Geithner said, as he outlined at the U.S. Treasury Department the President's framework for tax revamp, which aimed at enhancing American competitiveness by simplifying the tax code and addressing deficiencies of the tax system.

The Barack Obama administration proposes to lower the corporate tax rate from the current top rate of 35 percent to 28 percent and give incentives to manufacturers by reducing their effective rate to no more than 25 percent.

A minimum tax would be introduced on foreign earnings of U.S. companies, as Obama vowed many times to encourage domestic investment and bring jobs back to the United States.

The tax reforms would also reduce the tax burden on small business, which would be allowed to expense up to one million in investments.

"The President's proposal is designed to start the process of fundamental tax reform. This process will take time," Geithner said. "A long-term growth strategy for the United States requires tax reform," he noted.

Under the framework, the tax reform should be fully paid for and result in no increase to the deficit.

Obama said later on in a statement that current U.S. corporate tax system is "outdated, unfair and inefficient" as it provides tax breaks for moving jobs and profits overseas and hits companies that choose to stay in America with one of the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.

In his State of the Union address, the U.S. president said he wanted to remove tax credit which encouraged companies to move jobs overseas and reward companies that invest and hire in America.

There is broad support in both parties for changes to the current U.S. tax code, but the two sides are divided on details. Dave Camp, House Ways and Means Committee chairman, proposed to cut the corporate rate even further to 25 percent.

The proposal is subject to congressional approval. Many analysts said its prospects are uncertain during an election year.