The President's Corporate Tax Reform Framework a Promising Start but Falls Short on Raising Revenue

[Bill USA]

Revenue Neutrality Is Not Sufficient to Help Address Nation’s Deficit Problems

http://www.cbpp.org/cms/index.cfm?fa=view&id=3692


The Administration has advanced a coherent framework for corporate tax reform that could lead to a more efficient corporate tax regime. [1] The framework's main weakness is that it seeks no deficit-reduction contribution from corporate tax reform, aiming only for revenue neutrality.

Given the nation's serious long-term budget problems and the painful sacrifices that policymakers will have to impose to put the budget on a sustainable path, it is imperative that all parts of the budget be on the table. A key test of well-designed corporate tax reform, therefore, is that it contributes to long-term deficit reduction; the Administration's framework falls short in this critical area. The framework also lacks detail on how to achieve its revenue-neutrality goal.

To its credit, the Administration's framework addresses the other key tests of successful corporate tax reform. [2] It would impose a minimum tax on the overseas profits of U.S.-based firms to correct the tax code's tilt in favor of overseas investments and to reduce corporations' incentives to shift domestic profits to tax havens. It calls for reducing the tax code's bias toward debt financing of corporate investments and for achieving greater parity between the tax treatment of large businesses with different corporate structures. Finally, it calls for the elimination of certain industry-specific tax subsidies.

Framework Points to Important Areas for Broadening Tax Base

The United States has a high statutory corporate income tax rate compared to other wealthy countries. Yet, because of the tax code's many deductions, credits, and other writeoffs, it raises less revenue as a share of the gross domestic product (GDP) than most other members of the Organisation for Economic Co-operation and Development (OECD). Corporate tax revenues in the United States equaled 2.6 percent of GDP in 2007, placing it 21 st of the 28 OECD countries for which data are available (see Figure 1).
[FONT SIZE="3"]
U.S. CORPORATE TAX REVENUE LOW BY INTERNATIONAL STANDARDS[/FONT]



<more>

[MrSlayer]

1. We really need to raise taxes on everyone.

Clinton rates for everyone except the top 1% who need to go a bit above that. Raise the SS cap, eliminate oil subsidies and corporate loopholes. That would work.