Transcript
ERIC TODER: I'll just talk very briefly about the issues that we are discussing today. International tax reform poses really special challenges to tax reforms. We all in the tax reform business think a good tax system should minimize distortions particularly in how we treat different kinds of investments and let the market work. But in a world with sovereign countries having independent tax policies, it is really impossible to eliminate distortions on all margins, and the typical thing is that you can't equalize tax rates paid by U.S. companies on all investments regardless of location and at the same time equalize tax rates on all corporations in the same location.
While the rules for international tax are extraordinarily complex, there are choices between broad conflicting principles, and the Tax Reform Panel has addressed two of them. The first is whether to tax normal returns to corporate investment at all, or replace the corporate tax with a consumption tax, a cash flow-type tax. The second is if one does keep an income tax, should you tax income on a world-wide basis with credits, or should have a territorial system. And the third is if you have a consumption tax, there are many design issues within that, too, and one of the issues that will be discussed today is whether it should or should not be border-adjustable and what that matters, or what the consequences are.
So today's speakers will be talking about the implications of these choices for the location of investment and in consequence for trade flows, for the value of assets held by U.S. individuals and value of equities by U.S. corporations if there is a transition, and also, I suppose, foreign asset-holders. And I anticipate we will be learning a lot about these issues today.
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