![]() Since passage of the TCJA, a variety of proposals have been introduced, ranging from relatively simple increases in the statutory corporate tax rate to complicated changes to the corporate income tax base or raising the effective tax rate on foreign income earned by U.S. The top federal corporate income tax rate fell from 35 percent to 21 percent beginning in 2018, investment in short-lived assets was provided bonus depreciation (also known as full expensing), and the treatment of foreign income was completely overhauled, among other changes to the corporate income tax base. ![]() In December 2017, Congress passed the Tax Cuts and Jobs Act (TCJA), which greatly changed the way corporations, pass-through businesses, and individual taxpayers were treated in the tax code. Related: Tax Proposals by the Biden Administration Introduction - Economic and Revenue Effects of a Minimum Tax on Corporate Book Income.- Experience with the Now-Repealed Corporate Alternative Minimum Tax.- Consequences of a Minimum Book Tax on Financial Accounting and the Tax Code.- Structure and Motivation for a Minimum Tax on Corporate Book Income.- Corporate Income Taxation, Supernormal Returns, and American Dynamism.- Impact of the Corporate Income Tax on Workers.- Economic, Revenue, and Distributional Impact of a Corporate Income Tax Increase.- Corporate Tax Changes and Marginal Effective Tax Rates.- The Statutory Corporate Income Tax and American Competitiveness.The tax would potentially undermine current-law investment incentives as well as those proposed by President Biden, such as the “Made in America” tax credit. Such a minimum tax would likely introduce additional complexity and distortions into the tax code and generate relatively little tax revenue, in part because firms have a degree of flexibility in reporting book income. A minimum tax on the book income of large corporations would target gaps between financial and taxable income that generally exist because the rules for taxation differ from standards for reporting income to shareholders.For example, the bottom 20 percent of earners would on average see a 1.45 percent drop in after-tax income in the long run. Workers across the income scale would bear much of the tax increase. We estimate that this would reduce long-run economic output by 0.8 percent, eliminate 159,000 jobs, and reduce wages by 0.7 percent. economic competitiveness and increasing the cost of investment in America. federal-state combined tax rate to 32.34 percent, highest in the OECD and among Group of Seven (G7) countries, harming U.S. An increase in the federal corporate tax rate to 28 percent would raise the U.S.The proposals are being considered to raise revenue for new spending programs and would repeal changes to the corporate tax made by the Tax Cuts and Jobs Act (TCJA) in late 2017. President Joe 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.
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