Approaches to Improve the Competitiveness of the U.S. Business Tax System for the 21st Century

摘要

This report is a follow-up to the July 26th conference and, as with the conference, it seeks to advance an important dialogue on the key linkages between tax policy and American competitiveness in the global economy. Three broad approaches for reforming the U.S. business tax system are outlined: (1) replacing business income taxes with a business activities tax (BAT), a type of consumption tax, (2) eliminating special business tax provisions coupled with either business tax rate reduction or faster write-off of business investment, potentially combined with the exemption of active foreign earnings, and (3) implementing specific changes that focus on important structural problems within our business tax system. Rather than present a particular recommendation, this report examines the strengths and weaknesses of the various approaches. The various policy ideas discussed in this report represent just some of the approaches that could be considered. This report does not advocate any specific recommendation nor does it call for or advance any legislative package or regulatory changes. The approaches discussed in this report would improve the competitiveness of the United States as compared to the current system for taxing U.S. businesses. Nevertheless, the approaches differ in a number of dimensions. The BAT described in Chapter II would possibly provide the largest benefit in terms of its effect on expanding the size of the economy ultimately increasing output by roughly 2.0 percent to 2.5 percent but raises a number of serious implementation and administrative issues.