A growing international tax agreement known as Pillar Two presents two new threats to the U.S. tax base: potential lost revenue and limitations on Congress’s ability to set its own tax policy.
Cody Kallen was a Resident Fellow at the Tax Foundation, where he worked on federal tax policy and tax model development.
According to our analysis, President Biden’s budget would reduce long-run economic output by about 1.3 percent and eliminate 335,000 FTE jobs. See what tax policies the president is proposing.
The business tax changes originally introduced in the TCJA are scheduled to increase tax burdens on businesses at a time when economic headwinds and broader uncertainty are higher than they have been in decades.
The phaseout of 100 percent bonus depreciation, scheduled to take place after the end of 2022, will increase the after-tax cost of investment in the U.S. Permanently extending it would increase long-run economic output by 0.4 percent and increase employment by 73,000 FTE jobs.
In dollar terms, the industries that would account for the largest book minimum tax liabilities are manufacturing, at $73.2 billion, followed by finance, insurance, and management at $46.9 billion.
How will the Inflation Reduction Act taxes impact inflation, economic growth, tax revenue, and everyday taxpayers? See Inflation Reduction Act tax changes.
While exempting accelerated depreciation from the book minimum tax would reduce some of the economic harm of the tax, there remain many unresolved problems within the design and structure of the tax that make it a poorly chosen revenue option.
As Congress contemplates adding a new worldwide interest limitation rule as part of the House Build Back Better Act, it is useful to consider the potential effects of this proposal as well as whether it is necessary to add this on top of the U.S.’s existing restrictions on the value of interest deductions.
Learn more about the House Build Back Better Act, including the latest details and analysis of the Biden tax increases and reconciliation bill tax proposals.
One unintended consequence of the tax proposals in the Build Back Better Act is a higher potential burden on wireless spectrum investments, which could slow the build out of 5G technology as the U.S. races to compete with other countries—moving in the opposite direction of countries like China that are actively subsidizing 5G expansion.
If Congress wants to reduce profit shifting, the proposal from the Ways and Means Committee is not an effective tool for this.
Using Tax Foundation’s Multinational Tax Model, we estimate the effective tax rates on controlled foreign corporation (CFC) profits under current law and under each of the proposed plans for business tax hikes.
In general, the effective tax rates on the foreign profits of U.S. multinationals are not that low relative to the U.S. tax rate, contrary to popular rhetoric.
The proposed restructuring of the GILTI and FDII regimes makes several changes to the tax base that are largely offsetting, leaving virtually all the revenue potential to be determined by the tax rates on GILTI and FDII and the haircuts on foreign tax credits. Lawmakers should carefully weigh the trade-offs between higher tax revenues and competitiveness.
While arcane, expense allocation rules are relevant to current debates because they result in a heavier tax burden for U.S. companies under current law than the recently negotiated global minimum tax proposal.
There are many ways the U.S.’s international tax rules could be changed, reformed, improved, or worsened. Reflexively jacking up taxes on U.S. multinationals does not necessarily accomplish the goal of reducing or eliminating profit shifting, and it would in fact worsen it.
The Biden administration’s international tax proposals would impose a 7.7 percent surtax on the foreign profits of U.S. multinationals, resulting in a net increase in profit shifting out of the U.S.
Details and analysis of the American Jobs Plan tax proposals. Learn more about the major tax changes in the proposed Biden infrastructure plan.
The international corporate tax changes in President Biden’s tax plan would increase tax rates on domestic income more than on foreign income, resulting in a net increase in profit shifting out of the US, according to our Multinational Tax Model.