Do you think that the new tax act helped or further complicated the tax code?
As a senior tax manager at a CPA firm, I think the new tax act complicated the tax code for a few
reasons. While it appears that raising the state standard deduction would help individual simplify
their tax returns, some states did not comply with the raising of the standard deduction, so for tax
professionals we had to still request the information from the taxpayer. Also depending on what
types of clients we are talking about; they still qualify for the itemized deduction due to high
charitable contributions or mortgage interest.
One major part of our job every year is to provide tax projections to large clients who need to
know what type of tax saving decisions to make before year end. When the new legislation came
out regarding QBI we realized how complex it was to calculate and how it changed based on each
entity and the changes of that entity in the projection. For clients that are members of many
partnerships and S corporations you must estimate the income, wages, and unadjusted basis in
qualified property. So, if you are changing the income due to a pension contribution, or wages for
employee bonuses or basis in property for new equipment purchases they would all need a new
199A calculation.
Have we become more competitive with other countries?
My experience with TCJA was only to taxpayers and clients in the US. I found the article, what are
the Consequences of the New US International Tax System interesting! I have not heard about the
Global Low Tax Intangible Income (GILTI) and never really thought about how multinational
companies reallocate to get a lower tax. I know it happens, but I never needed to dive into the
issue. The TCJA substantially reduced, but did not eliminate, the incentive for US corporations to
shift profits to tax havens (Tax Policy Centre 2020). I believe we are becoming more competitive
but there is still room for improvement to try and stop having companies relocate to other
countries.
Why is international tax so important to the U.S. tax code?
There are a few reasons why international tax is so important. The first being globalization.
Globalization the growing interdependence of countries resulting from increasing integration of
trade, finance, investment, people, information, and ideas in one global marketplace has resulted
in increased cross-border trade, and the establishment of production facilities and distribution
networks around the globe (Olson 2003). Another reason is competitiveness. Companies are
competing for sales; they are also competing for capital (Olson 2003).
Do you think that the new tax act helped or further complicated the tax code? While nobody
enjoys paying taxes it has been fluctuated over the years. Initially major income tax law was
implemented in 1861 to fund the Civil War. Due to limitation in tax research, income tax rate
fluctuated from 67% in 1917 to 94% in 1944. In our textbook it states "the researcher must
understand fully all facts that could affect the related tax outcome" (Federal Tax Research, 2021).
Recent tax act was released in 2017 under the Tax Cuts and Jobs Act, which covered many aspects
of taxation including corporate, individual, and international taxation. This act effectively reduced
corporate taxes from 35% to 21% to prevent shift of large corporations to overseas. In 2021 the IRS
and federal government came up with American Rescue Plan Act to help families to cure after
Covid-19 pandemic. This act increased child tax credit from $2000 to $3600, unemployment
compensations excluded $10,200 from taxpayers’ income, the IRS also implemented tax free
stimulus checks. Unfortunately, these provisions were expired in 2022. b
Have we become more competitive with other countries? Currently US multinational corporations
only face 10.5% minimum tax rate on their foreign earnings. Under President's Made in America
Tax Plan it proposed to pass tax increase to 21%. b Many corporations argue that their foreign
competitors often pay 0% on their foreign earnings and to maintain "competitiveness" they should
not be forced to pay higher tax rate. Either way, for many years US corporations have been the
most competitive and profitable in the world due to advantages in large market and well-educated
work force.
Why is international tax so important to the U.S. tax code? We do not need to be operating
overseas to face international tax issues. We all live and work in a global economy. Businesses
might ship products overseas or employ someone who is not a U.S. citizen. With the increased
emphasis by the U.S. government on the proper treatment and reporting of international assets
and transactions, along with the high penalties associated with noncompliance in this area, it is
critical that US tax code identify any potential international tax issues associated with doing
business in a global economy.
References:
Federal Tax Research. R.B. Sawyers & S.L.Grill, 12th Edition (2021).
Why the United States Needs a 21% Minimum Tax on Corporate Foreign Earnings, link:
https://home.treasury.gov/news/featured-stories/why-the-united-states-needs-a-21-minimum-tax-
on-corporate-foreign-earnings
Olson, Pamela (July 15, 2003). Testimony of Pamela Olson, Assistant Secretary for Tax Policy, United
States Department of the Treasury before the Senate Committee on Finance on International Tax
Policy, and Competitiveness. https://home.treasury.gov/news/press-releases/js555
Tax Policy Centre (May 2020). What Are the Consequences of the New US International Tax
System? https://www.taxpolicycenter.org/briefing-book/what-are-consequences-new-us-
international-tax-system
