U.S. Corporate Income Tax Reform and its Spillovers

48 Pages Posted: 9 Dec 2016

See all articles by Kimberly A. Clausing

Kimberly A. Clausing

Reed College - Department of Economics

Edward D. Kleinbard

University of Southern California Gould School of Law

Thornton Matheson

International Monetary Fund (IMF)

Date Written: July 2016

Abstract

This paper examines the main distortions of the U.S. corporate income tax (CIT), focusing on its international aspects, and proposes a set of reforms to alleviate them. A bold reform to replace the CIT with a corporate-level rent tax could induce efficiency-enhancing reform of the international tax system. Since fundamental reform is politically difficult,this paper also proposes an incremental reform that would reduce tax expenditures, reduce the CIT rate to 25-28 percent, and impose a minimum rent tax on foreign earnings.Finally, this paper analyzes empirically the likely impact of the incremental on corporate revenues outside the U.S.: Though a U.S. rate cut would likely lower revenues elsewhere,implementation of a strong minimum tax could more than offset that effect for most countries with effective tax rates above 15 percent.

Keywords: Corporate income taxes, United States, Tax reforms, Positive spillovers, International taxation, Tax systems, Corporate income tax, tax reform, international taxation

JEL Classification: H25, H26

Suggested Citation

Clausing, Kimberly A. and Kleinbard, Edward D. and Matheson, Thornton, U.S. Corporate Income Tax Reform and its Spillovers (July 2016). IMF Working Paper No. 16/127. Available at SSRN: https://ssrn.com/abstract=2882562

Kimberly A. Clausing (Contact Author)

Reed College - Department of Economics ( email )

3203 SE Woodstock Boulevard
Portland, OR 97202-8199
United States
503-517-7388 (Phone)
503-777-7776 (Fax)

Edward D. Kleinbard

University of Southern California Gould School of Law ( email )

699 Exposition Boulevard
Los Angeles, CA 90089
United States

Thornton Matheson

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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