2017年-PIIE彼得森国际经济研究所_Lessons_for_US_Business_Tax_Reform_from_International_Tax_Rates_18页_252kb

POLICY BRIEF SUMMARY: Lessons for US Business Tax Reform from International Tax Rates

Core Content

This policy brief, authored by Gary Clyde Hufbauer and Zhiyao (Lucy) Lu in January 2017, analyzes the implications of international corporate tax rates for US business tax reform. It highlights the need for reform based on three main reasons: the complexity of the US tax system, lagging investment in research and development and plant and equipment, and the unfavorable disparity between US corporate tax practices and those in other advanced countries.

The brief evaluates two major business tax reform proposals from the time—Donald Trump's and the Ryan/Brady Blueprint—and concludes that both advocate for substantial corporate tax rate cuts and a shift towards more business-friendly tax structures. A key recommendation is to reduce the corporate tax rate, which is seen as essential for attracting both foreign and domestic investment.

Main Views

• US Corporate Tax Burden is High: The actual average tax rate for US-based multinational corporations (MNCs), calculated from the Reuters Fundamentals database, is 31.1 percent, higher than the simple average of foreign groups at 28.0 percent.

• Tax Complexity and Investment Disparities: The US tax system is complex, with small and medium-sized enterprises spending 175 hours annually on compliance. Additionally, US private domestic nonresidential investment has remained below 15 percent of GDP for two decades, with intellectual property investment under 4 percent.

• Global Tax Rate Trends: The US corporate tax rate is not in line with global norms. Many advanced economies have lower statutory and effective tax rates, with the UK planning to cut its corporate tax rate to 17 percent by 2020, making it the lowest in the G-20.

• Tax Reform Proposals:

  • Trump's Plan:
    • Lower corporate tax rate to 15 percent.
    • Eliminate the corporate alternative minimum tax.
    • Tax unrepatriated foreign earnings at 10 percent, with a foreign tax credit.
    • Allow firms to choose between expensing capital investment or deducting interest expense.
    • Eliminate corporate tax expenditures except for the research and development credit.
  • Ryan/Brady Blueprint:
    • Tax cash flow rather than corporate income.
    • Flat cash flow tax rate of 20 percent.
    • Repeal the corporate alternative minimum tax.
    • Adjust tax at the border by exempting exports and disallowing deductions for imports.
    • Replace the worldwide tax system with a territorial system.

Key Information

• The Reuters Fundamentals Database was used to calculate actual tax rates for MNCs. It includes over 53,000 companies and provides detailed financial and non-financial data.

• The dataset was grouped into 24 distinct country groups based on size, geography, and tax rate similarity, with 50 or more firms in each group.

• Statutory tax rate: The official corporate tax rate as reported by the government.

• Marginal effective tax rate: The tax rate that applies to an additional dollar of investment, calculated using Chen and Mintz (2015) methodology.

• Average actual tax rate: Reflects the real tax burden experienced by firms over time, calculated from the Reuters dataset.

Tax Rate Analysis

• Statutory vs. Actual Tax Rates: The actual average tax rate is significantly lower than the statutory rate in many countries due to credits, deductions, and loopholes.

• Correlation of Tax Rates: There is a strong positive correlation between the weighted statutory tax rate and the weighted marginal effective tax rate, indicating that statutory rates can predict the effective tax burden on new investments. However, the average actual tax rate is not highly correlated with either, suggesting that the complexity and idiosyncrasies of tax codes lead to significant variation in real tax burdens across firms and over time.

• Country Group Comparisons:

  • The US has the highest weighted statutory tax rate at 40.00 percent.
  • The average actual tax rate for the US is 31.11 percent.
  • The weighted marginal effective tax rate for the US is 35.60 percent.
  • The average actual tax rate across all countries is 28.11 percent, excluding the US.

Conclusion

The brief concludes that a substantial corporate tax rate cut should be a central component of comprehensive business tax reform in the US. Lowering the tax rate to align with global norms could significantly boost investment and competitiveness. It also emphasizes the importance of simplifying the tax code and adopting a territorial system to make the US more attractive for MNCs and encourage domestic investment.