Republicans and Democrats don’t agree on much these days, but they do agree that America’s antiquated corporate-income-tax system deserves an overhaul.
America has a labyrinthine maze of tax breaks that distort economic incentives and favor certain industries and companies over others. In addition, the worldwide scope of U.S. corporate taxation encourages firms to keep their foreign profits overseas. The current system is a textbook case of bad public policy.
Recognizing these problems, House Republicans have put forward a plan that would transform the federal corporate-income tax, which has a top rate of 35 percent, into a “destination-based cash-flow tax” with a flat rate of 20 percent.
While the plan has its merits, it might well violate U.S. trade agreements and could also spark global financial turmoil. A better solution would be to adopt a broad-based consumption tax that could help finance large income-tax reforms — both for businesses and for individuals — without losing revenue or making the tax code less progressive.
Read on to better understand the how reforming our corporate-income tax would creating a revenue system that’s more conducive to investment, job creation, and broad-based prosperity