Changes in the taxation of business income by our major trading partners are creating shock waves in the United States. Corporate tax rates in other countries have been falling, while the U.S. federal rate has remained at 35 percent since 1993. The combined state-federal corporate tax rate in the U.S. is now the highest in the OECD. Most other countries exempt most foreign-source income of their multinationals from tax, while the U.S. continues to tax repatriated profits. And many other countries are providing new benefits for their multinationals including “patent boxes” that allow special tax rates for income from research and innovation. The OECD’s base erosion and profit shifting (BEPS) initiative is intended to limit the ways in which companies can shift their profits to low-tax jurisdictions to avoid taxation, but American multinationals complain that BEPS is mostly aimed at them. And in the wake of BEPS, some countries are enacting new “diverted profits taxes” that target U.S. multinationals.
On Tuesday, May 3, the Urban-Brookings Tax Policy Center examined the implications of these worldwide changes for tax reform in the U.S. The symposium is named for Donald C. Lubick, who served in senior tax policy positions in the government for over four decades, and honors his extraordinary record of public service on behalf of better tax policy.
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