Old Rules and New Realities: Corporate Tax Policy in a Global Setting
34 Pages Posted: 19 Oct 2004
Date Written: October 2004
This paper reassesses the burden of the current U.S. international tax regime and reconsiders well-known welfare benchmarks used to guide international tax reform. Reinventing corporate tax policy requires that international considerations be placed front and center in the debate on how to tax corporate income. A simple framework for assessing current rules suggests a U.S. tax burden on foreign income in the neighborhood of $50 billion a year. This sizeable U.S. taxation of foreign investment income is inconsistent with promoting efficient ownership of capital assets, either from a national or a global perspective. Consequently, there are large potential welfare gains available from reducing the U.S. taxation of foreign income, a direction of reform that requires abandoning the comfortable, if misleading, logic of using similar systems to tax foreign and domestic income.
Keywords: Corporate taxation, international taxation, multinational corporations, foreign tax credit
JEL Classification: H87, H21, F23
Suggested Citation: Suggested Citation