Yesterday's release of the White House "Business Tax Reform" marks a watershed in the corporate tax debate. Now nearly everyone acknowledges that U.S. corporate tax rates hurt American companies. The headline that President Obama wants voters to see is his new top statutory rate of 28%. If only the story ended there . . .

Alas, his reform is stuffed with so many offsetting business tax increases that the overall impact of this and other proposals would make the U.S. tax system less globally competitive and raise effective tax rates above what they are today.

But let's start by praising what Mr. Obama gets right. He's spot on in acknowledging that the U.S. "statutory tax rate [35%] will soon be the highest among advanced countries" and that the "relatively narrow tax base and a high statutory tax rate" create a tax system that "is uncompetitive and inefficient." What do you know, tax rates matter.

Cutting the rate to 28% would leave the U.S. above an international average closer to 25%-27%, but it is still welcome. The White House is also right that the current tax code favors debt over equity financing.

The problem is that the tax increases in this and other Obama proposals would add new layers of inequity and inefficiency to the tax code. One principle of tax reform is to create neutrality within and across industries—a level playing field. As the White House proposal puts it, the current code "distorts choices such as where to produce, what to invest in, how to finance a business, and what business form to use."

But then the plan ignores that advice and picks winners and losers. It offers a sweetheart 25% rate for certain manufacturers and even lower for "advanced manufacturing," which would invite a lobbying free-for-all in Congress. Meanwhile, the plan punishes those the White House doesn't like, such as companies in oil and gas or with operations abroad.

But how is a company that makes computer hardware any more deserving of lower rates than one that makes computer software? Why does the company that makes the paper for this newspaper deserve a lower tax rate than the company that publishes the newspaper?

The oil and gas industry has led manufacturers in job creation for four years and already pays at or near the highest effective federal tax rate of any industry. Yet the President's tax plan raises its taxes but retains (as best we can tell) the credits and other giveaways to his supporters in green energy.

The plan also takes a mercantile view of trade by raising taxes on U.S. corporations doing business abroad but cutting taxes on foreign companies that operate in the U.S. Since about 80% of global business is overseas, it's not clear how this taxing scheme would make American firms more competitive.

Mr. Obama's goal is to stop outsourcing and return operations to the U.S. But the main effect would be for U.S. multinational firms to become German, Chinese or Swiss, and thus exempt from the uncompetitive U.S. taxing regime. The best way to prevent outsourcing is to get U.S. tax rates on capital and corporate profits as low as possible.

Other distortions abound. This week Mr. Obama proposes a 28% rate for corporations, but last week he endorsed a 41% tax rate on nearly 30 million businesses that are not corporations and thus pay profits taxes as personal income. (See above.)

Even the boasts of tax simplicity are overstated. One of the biggest revenue raisers in the plan is a new "global minimum tax" applied to corporations, which means Ford and Apple would get to fill out another set of tax forms. Such a tax is likely to lead to the same complexities, extra compliance costs and headaches as the hated Alternative Minimum Tax has for individuals.

What the White House reformers don't like to admit is that corporate profits are taxed twice—first, via the corporate tax, then again at the shareholder level through the dividend or capital gains levies. Mr. Obama wants to cut the top corporate tax rate by 20% but raise the capital gains tax by almost 60% and nearly triple the dividend rate.