Obama has not laid out a plan for overhauling personal income taxes. But he has called for Bush era tax cuts to end on individuals making more than $200,000, thus increasing their taxes, and for a 30 percent minimum tax on taxpayers who make $1 million or more.
Obama decried the current corporate tax system as outdated, unfair and inefficient. "It's not right and it needs to change," he said in a statement.
The president would reduce the current 35 percent corporate tax, which is the highest in the world after Japan but which many corporations avoid by taking advantage of deductions, credits and exemptions. Under his plan, manufacturers would receive incentives so that they would pay an even lower effective tax rate of 25 percent.
His plan would eliminate corporate tax benefits like oil and gas industry subsidies and special breaks for the purchase of private jets - two provisions that Obama has long targeted - and do away with certain corporate tax shelters.
In addition, Obama also would impose a minimum tax on foreign earnings, a move opposed by multinational corporations and perhaps the most contentious provision in the president's plan.
"It's a framework that lowers the corporate tax rate and broadens the tax base in order to increase competitiveness for companies across the nation," Obama said.
Romney has also called for a 25 percent corporate tax rate, in line with what some congressional Republicans want. Campaigning in Arizona, the former Massachusetts governor said that if elected president he would propose lowering the top personal income tax rate to 28 percent from the current 35.
In Congress, Republican reaction was mixed. House Ways and Means Committee Chairman Dave Camp, R-Mich., said he appreciated the administration's plan, though it set a corporate tax rate that is higher than the 25 percent he has proposed. He faulted Obama, however, for not offering a wholesale overhaul of the tax system for businesses and individuals.
"While this is a good step by the administration, I will borrow from the president's own words to Congress from just yesterday: 'Don't stop here. Keep going,'" Camp said in a statement. But Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee, dismissed the president's plan as a "set of bullet points designed more for the campaign trail than an actual blueprint for fixing our tax code."
The issue of taxation has been a recurrent theme throughout Obama's presidency. He has reduced some taxes for small businesses and has pressed Congress to temporarily cut payroll taxes on American workers to help prime the weak economy.
But he has also called for reducing the nation's long-term deficits with a mix of tax increases and spending cuts. Republicans have flatly rejected tax increases. And Romney on Wednesday criticized Obama's proposal for corporations, saying they would result in higher taxes.
Under the framework proposed by the administration, the rate cuts, closed loopholes and the minimum tax on overseas earning would result in no increase to the deficit.
That means that many businesses that slip through loopholes or enjoy subsidies and pay an effective tax rate that is substantially less than the 35 percent corporate tax could end up paying more under Obama's plan. Others, however, would pay less while some would simply benefit from a more simplified system.
Obama's plan would result in about $250 billion in additional revenue over the next 10 years. But that money would be used to pay business tax credits that are currently temporary and that Obama would make permanent, administration officials said.
Corporate income taxes have been shrinking as a share of overall federal taxes for decades. In 2010, corporate income taxes made up just 12 percent of all federal tax receipts, down from 24 percent in 1960, according to the IRS.
Reducing the corporate tax rate to 28 percent would reduce tax revenues by about $700 billion over the next decade, according to an estimate prepared in October by the Joint Committee on Taxation, the official scorekeeper for Congress.
That means lawmakers would have to find about $70 billion a year in tax increases to keep the package from adding to the budget deficit, hardly an easy task.
Treasury Secretary Timothy Geithner, who presented Obama's plan, acknowledged that the debate "will be politically contentious."
"Some will say these proposals are too tough on business, and others will say that they're not tough enough," he said.
Indeed, several liberal-leaning groups criticized Obama's plan for being "revenue neutral" and not generating more tax money to pay for government programs. "We can and should collect more tax revenue from corporations," said Bob McIntyre, the director of Citizens for Tax Justice.
But the business groups objected to Obama's plan to impose a minimum tax on foreign earnings, insisting instead that the administration embrace a "territorial" system of taxation.
The United States taxes U.S.-based multinational corporations on foreign profits, once that money is returned to the United States. In a territorial system, the U.S. would only tax profits made in the U.S. By taxing the foreign profits of U.S.-based multinationals, the U.S. has a worldwide system of taxation.
Those foreign profits are not taxed unless they are brought to the United States. And, in many cases, they are simply reinvested overseas, so they are never subjected to U.S. taxes. Administration officials said that under Obama's plan, multinational corporations would continue to receive a tax credit for any taxes they pay overseas.
Among critics of his plan were the U.S. Chamber of Commerce and the high-tech industry, a group Obama has been eager to court.
"The framework would punish successful companies and push investments out of the United States," said Dean Garfield, president and CEO of the Information Technology Industry Council, which represents firms such as Cisco Systems Inc., Google, Apple Inc., and Intel Corp.
Associated Press writers Martin Crutsinger and Stephen Ohlemacher in Washington and Kasie Hunt in Mesa, Ariz., contributed to this report.