The existing tax code is biased against capital-intensive manufacturers, as it prevents companies from deducting capital costs the same way they deduct labor costs.
Fixing the bias against capital investment is preferable to pursuing industrial policy through the tax code, as subsidies tend to be ineffective and tariffs often weaken protected domestic industries and harm downstream industries.
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The Trump administration appears to be moving in a “reciprocal” policy direction despite the significant negative economic consequences for American consumers of across-the-board tariffs on goods coming into the US. However, the EU’s VAT system should not be used as a justification for retaliatory tariffs.
6 min read
Trump’s new tariffs on Mexico, Canada, and China would rank as the largest tax increase since 1993 and the 8th largest peacetime tax increase since 1940. We estimate the new tariffs would shrink economic output by 0.4 percent and increase taxes by $1.1 trillion, amounting to an average tax increase of more than $800 per US household in 2025.
22 min read
Investment matters across the economy, and policymaking should reflect that.
4 min read
Broad, pro-investment tax policy matters for growth, and the US has plenty of opportunities to make improvements, particularly given the advantages our cross-Pacific rival confers on its firms.
5 min read
How does tax policy shape a nation’s competitiveness? Today, we’re diving into the showdown between the US and China, exploring how China’s enticing tax incentives pose a formidable challenge to America’s economic supremacy.
Restoring expensing for R&D, machinery, and equipment; extending better cost recovery to structures investment; and avoiding raising the corporate tax rate would create a stronger, pro-investment policy environment for the US economy.
44 min read
With a changing economy—the law is about companies selling tangible products, but our economy is increasingly service-oriented—and state-level tests to the ongoing validity of the law, perhaps the time has come for Congress to update and expand upon these protections, which are designed to limit states from imposing substantial tax remittance and compliance burdens on businesses with only the most minimal of contacts with the state.
5 min read
Growing levels of waste and pollution, paired with increasing burdens on taxpayers to address environmental problems, have spurned policymakers in the US and abroad to encourage producers to be responsible, either financially or operationally, for the end-life of their products.
34 min read
When the government imposes a tariff, it may be trading jobs and production in one part of the economy for jobs in another part of the economy by increasing production costs for downstream industries.
6 min read
To recover from the pandemic and put the global economy on a trajectory for growth, policymakers need to aim for more generous and permanent capital allowances. This will spur real investment and can also contribute to more environmentally friendly production across the globe.
31 min read
While the approaches differ, they share a reliance on similar linkages: new capital investment drives productivity growth, which grows the economy and raises wages for workers.
37 min read
The U.S. House of Representatives has passed a highly anticipated bipartisan tax deal. The Tax Relief for American Workers and Families Act now awaits action in the Senate.
6 min read
Historical evidence and recent studies have shown that retaliatory tax and trade proposals raise prices and reduce the quantity of goods and services available to U.S. businesses and consumers, resulting in lower incomes, reduced employment, and lower economic output.
5 min read
The Trump campaign is mulling a massive tax increase on American purchases from China. If reelected, he might quintuple the tax, imposing tariffs of 60 percent on imports from China. The economic ramifications would be significant and unwelcome.
5 min read
The House Ways and Means Committee has advanced a tax deal to the House floor that would temporarily—and retroactively—restore two major business deductions for cost recovery and expand the child tax credit through 2025.
10 min read
Lawmakers should prioritize creating a tax system that supports investment more broadly rather than subsidizing specific industries and allowing broad, neutral pro-investment provisions to expire.
3 min read
The current tax treatment of R&D expenses is irrational, complicated, and counterproductive. Fortunately, fixing this problem is a bipartisan issue.
4 min read
Making expensing permanent is especially important now, when the economy is threatened with a recession and inflation remains high.
7 min read
To recover from the pandemic and put the global economy on a trajectory for growth, policymakers need to aim for more generous and permanent capital allowances. This will spur real investment and can also contribute to more environmentally friendly production across the globe.
33 min read
As final negotiations occur between the House and Senate, legislators should avoid adopting new policies that would jeopardize Kentucky’s business tax competitiveness.
5 min read