U.S. Corporate Income Tax Reform and its Spillovers
48 Pages Posted: 9 Dec 2016
Date Written: July 2016
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: Suggested Citation