Corporation-Friendly Treasury Regulations Reducing Federal Revenues
End Notes
[1] Congressional Budget Office, “The Budget and Economic Outlook: 2020 to 2030,” January 2020, https://www.cbo.gov/system/files/2020-01/56020-CBO-Outlook.pdf.
[2] Paul N. Van de Water, “Don’t Delay or Repeal Health-Related Taxes,” Center on Budget and Policy Priorities, December 9, 2019, https://www.cbpp.org/blog/dont-delay-or-repeal-health-related-taxes.
[3] Phill Swagel, “Recent Changes in CBO’s Projections of Corporate Income Tax Revenues,” Congressional Budget Office, February 7, 2020, https://www.cbo.gov/publication/56121.
[4] Together, the cost of the corporate-friendly international tax regulations, new financial data, and tax-avoiding corporate behavior likely exceeds $110 billion. That’s because the $110 billion is a net figure showing multiple changes to revenue projections from the 2017 tax law, and it includes some upward adjustments (or revenue savings) from technical changes CBO made related to the 2017 tax law’s cost recovery rules for businesses’ research and development spending.
[5] The BEAT targets corporations that artificially shift their profits using so-called “earnings-stripping” techniques, in which U.S. corporations use debt, for example, to siphon profits out of the United States and into low-tax countries, or tax havens.
[6] Samantha Jacoby, “Opportunity Zone Flaws Exemplify 2017 Tax Law’s Fundamental Flaws,” Center on Budget and Policy Priorities, October 31, 2019, https://www.cbpp.org/blog/opportunity-zones-exemplify-2017-tax-laws-fundamental-flaws.
[7] Jesse Drucker and Jim Tankersley, “How Big Companies Won New Tax Breaks From the Trump Administration,” New York Times, December 30, 2019, https://www.nytimes.com/2019/12/30/business/trump-tax-cuts-beat-gilti.html.
[8] Sony Kassam, “IRS Expands High-Tax Exclusion Under Global Minimum Tax,” Bloomberg, June 14, 2019, https://news.bloombergtax.com/daily-tax-report-international/irs-expands-high-tax-exclusion-under-global-minimum-tax. To avoid double taxation, U.S. corporations generally get tax credits (known as foreign tax credits) for the taxes they pay to foreign countries. In the case of the new minimum tax, 80 percent of any such foreign taxes paid can be credited back to corporations. This and other technical rules related to how corporate expenses are accounted for may mean that some companies could pay somewhat higher effective tax rates on their foreign income than the 10.5 percent minimum tax rate.
[9] Jim Tankersley and Peter Eavis, “Foreign-Owned Banks’ Results Could Sweeten Further Under Tax Law,” New York Times, July 19, 2019, https://www.nytimes.com/2019/07/19/business/banks-tax-cuts-deficit.html.
[10] Stephen E. Shay, “A GILTI High-Tax Exclusion Election Would Erode the U.S. Tax Base,” Tax Notes, November 18, 2019, https://dash.harvard.edu/bitstream/handle/1/41875121/165tnf1129-Shay.pdf?sequence=1&isAllowed=y.
[11] Congressional Budget Office.
[12] For an overview of how the 2017 tax law could affect corporate profit shifting, see Kimberly A. Clausing, “Profit Shifting Before and After the Tax Cuts and Jobs Act,” January 20, 2020, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3274827. A recent study found that, possibly in response to provisions of the 2017 tax law, major multinational corporations have significantly boosted their foreign investments since the enactment of the 2017 law, while their domestic investment remained flat. Brooke Beyer et al., “The Effect of the Tax Cuts and Jobs Act of 2017 on Multinational Firms’ Capital Investment: Internal Capital Market Frictions and Tax Incentives,” May 1, 2019, https://tax.unc.edu/index.php/publication/the-effect-of-the-tax-cuts-and-jobs-act-of-2017-on-multinational-firms-capital-investment-internal-capital-market-frictions-and-tax-incentives/.
[13] Chuck Marr, Brendan Duke, and Chye-Ching Huang, “New Tax Law Is Fundamentally Flawed and Will Require Basic Restructuring,” Center on Budget and Policy Priorities, August 14, 2018, https://www.cbpp.org/research/federal-tax/new-tax-law-is-fundamentally-flawed-and-will-require-basic-restructuring; David Kamin et al., “The Games They Will Play: Tax Games, Roadblocks, and Glitches Under the 2017 Tax Legislation,” Minnesota Law Review, May 7, 2019, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3089423##.
[14] Samantha Jacoby, “Pass-Through Deduction Regulations Reflect Industry Lobbying,” Center on Budget and Policy Priorities, January 30, 2019, https://www.cbpp.org/blog/pass-through-deduction-regulations-reflect-industry-lobbying; Samantha Jacoby, “Final Opportunity Zone Rules Could Raise the Tax Break’s Cost,” Center on Budget and Policy Priorities, February 3, 2020, https://www.cbpp.org/blog/final-opportunity-zone-rules-could-raise-tax-breaks-cost.