Preview

International Trade and Trade Policy

Advanced search

Corporate Tax Reform in the USA

https://doi.org/10.21686/2410-7395-2019-3-44-56

Abstract

The article examines the prerequisites, content and effects of changes in the corporate taxation system adopted in the United States under the Tax Cuts and Jobs Act in December 2017. The critical flaws and limitations of the US corporate taxation system that existed until 2018 are analyzed in detail. A conceptual consensus on the need to reduce the corporate tax rate and solving the problem of profit shifting existed in the US expert community for some time before the election of President D. Trump, but the balance of power in Congress made the changes impossible. The key provisions of the new corporate tax system, which primarily include a reduction in the corporate tax rate, reforming companies’ international taxation and measures to stimulate investment in the United States, are outlined. The expected consequences and first results of the reform, the impact of the adopted changes on the activities of different types of companies and on the US economy are considered. It is shown that the reform will lead to increased activity of both American and foreign companies on the US territory, as well as, possibly, a decrease in corporate tax rates in other countries. It is concluded that, despite the considerable budget burden, the tax reform will contribute to economic growth in the United States, both in the short and long run.

About the Author

O. V. Bogaevskaya
Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences
Russian Federation
PhD, Senior Researcher of the Center for North American Studies


References

1. Analysis of Growth and Revenue Estimates Based on the U.S. Senate Committee on Finance Tax Reform Plan. Department of the Treasury, 2017, December 11. Available at: https://www.treasury.gov/press-center/press releases/Documents/TreasuryGrowthMemo12-11-17.pdf

2. Armental M. U.S. Corporate Cash Piles Drop to Three-Year Low. The Wall Street Journal, 2019, June 10. Available at: https://www.wsj.com/ articles/u-s-corporate-cash-piles-drop-to-three-year-low-11560164400

3. Bowley G. In Tax Overhaul Debate, Large vs. Small Companies. The New York Times, 2013, May 23. Available at: https://www.nytimes. com/2013/05/24/business/in-tax-overhaul-debate-its-large-vs-small companies.html

4. Brossmer M. S., Jankun E. J., Montague T., Park J., Reiter R., Vance S. Tax Reform: and the Winner Is R & D. What’s News in Tax. KPMG, 2018, March 12. Available at: https://home.kpmg/content/dam/kpmg/us/pdf/ 2018/03/tnf-wnit-rd-march12-2018.pdf

5. Entity Choice and Effective Tax Rates. Quantria Strategies, LLC, 2013, August. Available at: http://s-corp.org/wp-content/uploads/2013/08/ Quantria_Study_ETR_8-6-13_Final_pm.pdf

6. Estimated Deficits and Debt under the Conference Agreement of H.R. 1. CBO. Washington D.C. Available at: https://www.cbo.gov/ system/files/115th-congress-2017-2018/costestimate/53437-wydenltr.pdf

7. Furman J. The 2017 Tax Law: a Boost to Growth or a Missed Opportunity? Capitalism and Society, 2018, Vol. 13, December 19. Available at: https://ssrn.com/abstract=3304175

8. Gale W. G., Gelfond H., Krupkin A., Mazur M. J., Toder E. Effects of the Tax Cuts and Jobs Act: A Preliminary Analysis. National Tax Journal, 2019, № 71 (4), pp. 589-612. Available at: http://dx.doi.org/10.2139/ssrn.3280582

9. Hanlon M., Hoopes J. L., Slemrod, J. B. Tax Reform Made Me Do It! Kenan Institute of Private Enterprise Research Paper, 2018, No. 18–36. November 5. Available at: http://dx.doi.org/10.2139/ssrn.3279253

10. Henderson R. US Capex Forecasts Plummet as Growth Jitters Resurface. FT.com. 2019, July 4. Available at: https://www.ft.com/ content/fb94977a-9dcf-11e9-9c06-a4640c9feebb

11. International Comparisons of Corporate Income Tax Rates. 2017, March. Available at: https://www.cbo.gov/sites/default/files/115th congress-2017-2018/reports/52419-internationaltaxratecomp.pdf

12. Jones C. Apple, Cisco, Google, Microsoft And Oracle Already Have a Tax Rate Below 20%. Forbes.com, 2017, November 18. Available at: https://www.forbes.com/sites/chuckjones/2017/11/18/apple-cisco-google -microsoft-and-oracle-already-have-a-tax-rate-below-20/#41e20e1d2bd9

13. Macroeconomic Analysis of the Conference Agreement for H.R. 1, the Tax Cuts and Jobs Act. 2017, December 22. Available at: https://www. jct.gov/publications.html?func=startdown&id=5055

14. Mintz J. Global Implications of U.S. Tax Reform, Ifo Schnelldienst, 2018, No. 7, April 12. Available at: https://www.ifo.de/DocDL/sd-2018-07-mintz-us-tax-reform-2018-04-12.pdf

15. Moody's Publishes Analysis of New US Tax Law on Multinational Corporations. 2018, April 30. Available at: https://www.moodys.com/research/ Moodys-publishes-analysis-of-new-US-tax-law-on-multinational--PR_383083

16. Moody's: US Corporates Emphasizing Debt Reduction Post-Tax Overhaul. 2018, November 13. Available at: https://www.moodys.com/ research/Moodys-US-corporates-emphasizing-debt-reduction-post-taxoverhaul--PR_391613

17. Pizzola B., Carroll R., Mackie J. Analyzing the Revenue Effects for Businesses and Key Industries under the Tax Cuts and Jobs Act. EY, 2018. Available at: https://www.ey.com/Publication/vwLUAssets/ey-tax reforms-effects-on-businesses-and-key-industries/$File/ey-tax-reforms effects-on-businesses-and-key-industries.pdf

18. Tankersley J., Phillips M. Trump’s Tax Cut Was Supposed to Change Corporate Behavior. Here’s What Happened. 2018, November 12. Available at: https://www.nytimes.com/2018/11/12/business/economy/trumps-tax

19. cut-was-supposed-to-change-corporate-behavior-heres-what-happened.html

20. York E. Business Investment Increases by 39 Percent in Q1 2018. 2018, April 27. Available at: https://taxfoundation.org/business-investment increases-39-percent-q1-2018/


Review

For citations:


Bogaevskaya O.V. Corporate Tax Reform in the USA. International Trade and Trade Policy. 2019;(3):44-56. (In Russ.) https://doi.org/10.21686/2410-7395-2019-3-44-56

Views: 602


Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 License.


ISSN 2410-7395 (Print)
ISSN 2414-4649 (Online)