Do you think that the new tax act helped or further complicated the tax code?
b b b b b b b b b b b b b The United States tax code is known to be complex and has a few implications in
relation to the US economy. b We read on a few testimonies that were delivered by Pamela Olson
that was directed to the Senate Committee which goes into details of how complex the tax code
really is, and the various affects it has on the United States in relations to competitiveness
advantage with many other countries. Congress has passed many laws and took many forms of
actions to help address and reform the taxes within the United States to effectively help reduce
overall ambiguity. This was also done to help increase incentives within the tax codes for various
reasons among the world and United States citizens. We can see that in 2017, Congress was able
to pass the Tax Cuts and Jobs Act, which released many new forms of tax updates for businesses,
international entities as well as individuals. This act has helped significantly in reducing both
domestic and foreign taxes. For example, the corporate tax rate use to be 35% but with this act it
has effectively reduced it to 21% to help keep companies from going overseas and doing business
in the United States.
b b b b b b b b b b b b b b I find that this new act has helped to lower taxes for everyone, but I do believe that it
also helped further complicate the tax codes even more than before. It may have helped to reduce
taxes for businesses which helped to attract new businesses from foreign nations to do business
within the United States, but it did increase the taxes for individuals.
Have we become more competitive with other countries?
I can agree that the United States have effectively changed the tax codes to make the country
more appealing to other nations to do business within the United States. Therefore, the US has
become more competitive to compete with the other nations in the world. Pam Olsen was able to
say in her testimony that it is imperative to find ways to be different from other major trading
partners to increase our competitiveness against these other countries to bring in a much higher
cash flow for the US.
Why is international tax so important to the U.S. tax code?
International tax for the United States is essential due to it helps to promote and encourage jobs,
profits as well as property all within the United States. Therefore, if we were to use tax codes that
are outdated or considered to be harmful, this can place a negative impact on the United States
industry and economy. In conclusion, it is imperative that the U.S. tax code is competitive for both
U.S. businesses as well as multinational companies to effectively compete with other nations and
to help shave the United States economy.
The new tax act further complicated the tax code. Providing benefits for corporations to establish
residency in a foreign country does not make sense. I believe if a corporation resides in the US,
does most his business within the US, top management employed are residents of the US, etc.
then, that corporation should be a resident-business of the US and should be accountable for US
taxation first and foremost. If the corporations choose to do business in other countries, then they
should be taxed upon those sales at that country's tax rate. Imposing transition taxes and dealing
with inversions just adds to the complexity of the tax code.
The US significantly reduced its corporate tax rate to be competitive with other countries. Here is
an image ranking the countries based on their tax competitiveness as of 2022:
Based on this ranking, the US falls at #22 for overall rank. The taxation revenue in the US varies
from the average country. For instance, the US receives 41.5% of their tax revenue from individual
income taxes, while the average is 24%. For corporate tax, the US receives about 3.9% of their
revenue while the average is 9.6%. It's bizarre that other countries get about 58% less in individual
income tax revenue and about 2.5 times as much from corporations.
Overall, international tax is important to the US tax code because revenue is earned based off of
taxes imposed. There are certain tax treaties that determine which countries collect that tax and
how the individual or business is treated for taxation. All of these directly affects the tax
competitiveness of the US in comparison to other countries.
References:
Bunn, Daniel (2022, October 17). International Tax Competitiveness Index 2022. Tax Foundation.
Retrieved on July 6, 2023 from, https://taxfoundation.org/publications/international-tax-
competitiveness-index/
Tax Foundation (2022). Taxes in the United States. Tax Foundation. Retrieved on July 6, 2023 from,
https://taxfoundation.org/country/united-states#sources
Tax Policy Centre (2020, May). Key Elements of the U.S. Tax System. Tax Policy Center. Retrieved on
July 6, 2023 from, https://www.taxpolicycenter.org/briefing-book/what-are-consequences-new-us-
international-tax-system
