The elimination of tax expenditures is a popular way to pay for tax reform, but not all tax expenditures are equally worthy of elimination. It is important to ask, for each expenditure, whether it serves a reasonable purpose and whether it accomplishes that purpose in a reasonable way.
A well-designed territorial tax system would reduce the incentive for companies to invert, encourage businesses to invest in and expand operations throughout the world, and allow capital to flow more freely back to the U.S., but would also come with some new challenges.
Real tax reform should boost incomes for all. A corporate income tax cut could be a means to do that, but not if it’s temporary. A temporary cut is less likely to promote growth and less likely to benefit American workers.
Interest deductibility creates holes in the tax base, distorts corporate investment strategies, and contributes to a potentially dangerous macroeconomic environment of overleveraging.
U.S. taxes on new business investment are uncompetitive globally. While corporate tax rate reductions would have a significant impact on competitiveness, expensing proposals currently being considered would add much more grease to make the wheels turn in the U.S. economy.
The federal government could pass comprehensive tax reform for the first time since 1986. Any federal tax change would impact state budgets, as most states tie their tax codes to the federal code. Here’s what states should expect and the options they’ll have if federal reform happens.
What is a border adjustment? What are the mechanics of how a border adjustment works, how would one affect U.S. businesses, and what are some pros and cons of enacting one?
