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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Policymakers actively marginalized the manufacturing sector by saddling them with cost recovery rules that prevent them from deducting the full cost of investment in physical plant and equipment. Going forward, policymakers should avoid haphazard fixes, targeted measures, and protectionism.
50 min read
Contrary to the president’s promises, the tariffs will cause short-term pain and long-term pain, no matter the ways people and businesses change their behavior.
5 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
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.
9 min read
If you’ve read any headlines in the last few months, you’ve no doubt heard about the semiconductor shortage gripping global supply chain—and if you’ve tried to buy anything from a toaster to a car, you’ve witnessed it firsthand. But what’s really driving today’s crisis, can the U.S. manufacture its way out of it, and what role does tax and economic policy have to play in all this?
A bipartisan group of Senators introduced a bill to create a permanent 25 percent tax credit for investments in semiconductor manufacturing equipment and construction of related facilities—but their proposal would not address underlying bias against investment that exists in the tax code today.
3 min read
Simplifying the R&D credit, making it more accessible for smaller firms, and ensuring full cost recovery for R&D expenses by canceling the upcoming R&D amortization are three things policymakers should consider when trying to improve the tax code for R&D.
40 min read
The ongoing pandemic has once again highlighted the importance of investment. To address the economic fallout of the pandemic, several OECD countries have temporarily accelerated depreciation schedules for various assets.
31 min read
As lawmakers evaluate how to respond to the global semiconductor shortage, they should consider allowing full cost recovery across all types of capital investment—inventories, machinery and equipment, structures, and R&D.
4 min read
President Biden and congressional policymakers have proposed several changes to the corporate income tax, including raising the rate from 21 percent to 28 percent and imposing a 15 percent minimum tax on the book income of large corporations, to raise revenue for new spending programs. Our new modeling analyzes the economic, revenue, and distributional impact of these proposals.
46 min read
Before considering industry-specific laws and subsidies for onshoring, policymakers should make sure the U.S. tax code is not biased against domestic investment in the first place.
4 min read
The Tax Foundation’s General Equilibrium Model suggests that allowing businesses to immediately deduct or “expense” their capital investments in the year in which they are purchased delivers the biggest bang for the buck in spurring economic growth and jobs compared to other tax policies.
7 min read
The Trump administration has imposed $42 billion worth of new taxes on Americans by levying tariffs on thousands of products. Outstanding threats to impose further tariffs mean additional tax increases up to $129 billion.
8 min read
