With loopholes as big as locomotives in the federal tax code, many of America's most profitable corporations pay little or nothing in corporate taxes. When companies don't pay their fair share, that means the rest of us have to pay more in taxes or get less in public services – or we increase the national debt.

So President Barack Obama's framework for business tax reform, announced Wednesday, is welcome and long overdue. It should generate discussion in this election year, with Republican presidential candidates offering their own plans. Mitt Romney has offered a general idea, but needs to offer more detail in coming days. Certainly, this country is ripe for a corporate tax overhaul.

The official corporate tax rate in the United States is 35 percent. But the average rate actually paid by U.S. corporations in 2011 was 26 percent. Many companies paid far less. Some paid nothing at all.

The Institute on Taxation and Economic Policy and Citizens for Tax Justice looked at 280 of the most profitable corporations in Fortune's list of America's 500 largest corporations for 2008, 2009 and 2010, and found that companies on average paid only about half of the 35 percent corporate tax rate.

Thirty of the 280 companies actually paid less than nothing over the three-year period – including General Electric, PG&E, DuPont, Verizon Communications, Boeing, Wells Fargo, Mattel, Honeywell International, Corning and more. Some got checks from the U.S. Treasury.

Because of loopholes, companies doing similar activities can pay taxes at dramatically different rates. For example, FedEx paid a three-year rate of 0.9 percent while United Parcel Service paid 24.1 percent.

This takes place in a global environment where corporate tax rates have been declining for more than 25 years, a competitive race to the bottom started by the United States, Ireland and Great Britain in the mid-1980s. Corporate tax rates that averaged close to 50 percent in the developed world in the early 1980s dropped into the 30 percent to 40 percent range by the 1990s.

In the United States, corporate tax rates have flattened at 35 percent, while they have continued to drop in other developed countries.

But there's a giant difference. These other countries have broadened their corporate tax base by ending special provisions – loopholes, shelters, tax preferences, tax expenditures, incentives or tax benefits – to prevent their tax base from being eroded.

We should do the same. That is what Obama is proposing – broadening the base while lowering the rate.

That should stanch the hemorrhaging of corporate tax revenue as a share of our economy. In 2011, U.S. corporate taxes were just 1.2 percent of gross domestic product (GDP), at historic lows since World War II – compared to 4.8 percent of GDP in the 1950s. We're at the bottom of the developed world on this, where the average is 3.5 percent of GDP. We can do better.

Obama has proposed eliminating dozens of tax subsidies and loopholes so that we can lower the 35 percent corporate tax rate in line with our competitors, while improving corporate taxes as a share of our economy – to about 2.5 percent of GDP. That's still below the average of other developed countries, but an improvement.

He would accomplish this by dropping the corporate tax rate to 28 percent, while removing disparities between different types of companies (such as unincorporated pass-through firms that avoid corporate taxes) and different types of industries (such as preferences for oil and gas production). He would require companies that shift profits earned in the United States to overseas tax havens like Bermuda and the Cayman Islands to pay a minimum tax on foreign earnings – no longer rewarding companies that move their profits offshore.

A simpler, fairer corporate tax system that actually collects revenue is better for the economy and for the nation's finances. Obama is on the right track on this.

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