Old Rules and New Realities: Corporate Tax Policy in a Global Setting

Desai, Mihir A.; Hines Jr., James R.
December 2004
National Tax Journal;Dec2004, Vol. 57 Issue 4, p937
Academic Journal
This paper reassesses the burden of the current U.S. international tax regime and reconsiders well-known welfare bench-marks used to guide international tax reform. Reinventing corporate tax policy requires that international considerations be placed front and center in the debate on how to tax corporate income. A simple framework for assessing current rules suggests a U.S. tax burden on foreign income in the neighborhood of $50 billion a year. This sizeable U.S. taxation of foreign investment income is inconsistent with promoting efficient ownership of capital assets, either from a national or a global perspective. Consequently, there are large potential welfare gains available from reducing the U.S. taxation of foreign income, a direction of reform that requires abandoning the comfortable, if misleading, logic of using similar systems to tax foreign and domestic income.


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