The report below is a chapter from the book, “Tackling the tax code: Efficient and equitable ways to raise revenue.” Read the full book here.
Despite the substantial revenue potential of corporate taxation, the United States currently collects about the lowest corporate revenue (only 1 percent of U.S. GDP) among the advanced economies. Several structural shortcomings of the corporate tax code—widely varying tax rates on different types of investment, insufficient support for research and development, and other weaknesses—limit its efficiency and progressivity. The corporate tax code could also play a larger role in countering increased concentration in the economy.
Jason Furman of Harvard University and the Peterson Institute for International Economics proposes several reforms to the corporate tax code. Specifically, Furman’s proposal would:
- Implement full and permanent expensing of all business investment while disallowing interest deductions
- Require large pass-through businesses to file as C corporations
- Close wasteful corporate tax loopholes
- Raise the corporate tax rate from 21 percent to 28 percent
- Expand incentives for investment in research and development (R&D)
The authors did not receive financial support from any firm or person for this article or from any firm or person with a financial or political interest in this article. Neither is currently an officer, director, or board member of any organization with a financial or political interest in this article.