The US International Tax Reforms: Competition and Convergence, Pay-Offs and Policy Failures

The recent U.S. international tax reforms are a hodgepodge of nominal and effective tax rate reductions, a poorly designed export subsidy and unnecessarily complex revenue raising tax base protections. The most significant “international” change in the 2017 U.S. tax legislation is the “permanent” reduction in the U.S. corporate tax rate. The base protections were jerry built on existing architecture. There was no effort to address the pervasive issue of remote sellers into the U.S. market. The overall result is very complex, lacks policy coherence, and, over the longer term, loses revenue. While reduced rates moderate incentive effects the revised rules manage nonetheless to encourage offshore shifting of real investment as well as profits.