Journal of Economic Perspectives
ISSN 0895-3309 (Print) | ISSN 1944-7965 (Online)
US International Corporate Taxation after the Tax Cuts and Jobs Act
Journal of Economic Perspectives
vol. 38,
no. 3, Summer 2024
(pp. 89–112)
(Complimentary)
Abstract
The root dilemma that informs the past, present, and future of US international taxation is the tension between two desiderata: protecting the corporate tax base from erosion and ensuring the competitiveness of US multinational firms in the world economy. This article begins by exploring that tension, discussing the evidence behind these competing policy goals. It then considers the international tax provisions of the Tax Cuts and Jobs Act of 2017. TCJA enacted transformative changes in US corporate tax policy, but it did not resolve long held policy concerns. While research on TCJA is in early stages, evidence indicates that TCJA substantially reduced corporate tax revenues, that TCJA's international provisions (as a whole) raised less revenue than expected, that offshoring and profit shifting remain large policy concerns, that changes in US multinational company competitiveness were mixed, and that underlying trends in wages and investment did not change due to TCJA. While TCJA was unable to resolve the tension between competitiveness and tax base protection, the Pillar 2 international tax agreement shows more promise in that regard. As countries throughout the world implement a "country-by-country" minimum tax on multinational income of 15 percent, this has the potential to disrupt long-standing arguments about international corporate taxation.Citation
Clausing, Kimberly A. 2024. "US International Corporate Taxation after the Tax Cuts and Jobs Act." Journal of Economic Perspectives, 38 (3): 89–112. DOI: 10.1257/jep.38.3.89Additional Materials
JEL Classification
- E23 Macroeconomics: Production
- F23 Multinational Firms; International Business
- G34 Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- H87 International Fiscal Issues; International Public Goods
- K34 Tax Law
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