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Assume you are a CPA and are hired by an elected official to recommend changes to the current tax code related to corporate taxes. Using the Internet or Strayer databases, conduct research on the current congressional proposals related to federal corporate taxation. Write a four to six (4-6) page paper in which you: Based on your research, assess which proposal you believe to be the most viable and financially attractive proposal for U.S. corporate taxpayers indicating how this proposal could be implemented.

Provide support for your rationale. Explore the impact to corporations and the US economy if U.S. companies could repatriate foreign profits earned without incurring a federal tax liability. Provide support for your rationale. Based on your research, which corporate taxes would you propose to eliminate and why? Determine the impact, positive or negative, that your proposed eliminations would have on corporations and the economy.

Provide evidence to support your position. Propose an alternative tax method for corporations and demonstrate how your proposed changes would be beneficial to corporate taxpayers compared to the current system for both corporations and the economy. Provide support for your rationale.

Paper For Above instruction

The current landscape of corporate taxation in the United States is complex and continually evolving, with numerous proposals aimed at reforming the tax system to foster economic growth, ensure fairness, and enhance global competitiveness. As a CPA advising an elected official, it is imperative to analyze these proposals critically and recommend strategies that align with economic objectives while maintaining fiscal responsibility. This comprehensive analysis evaluates congressional proposals, assesses their viability, explores the implications of repatriation policies, suggests tax eliminations, and proposes alternative taxation methods beneficial to corporations and the U.S. economy.

Analysis of Congressional Proposals

Several key proposals have emerged within Congress, aiming to overhaul corporate tax policies. Notably, the proposal to reduce the corporate tax rate from 21% to 15% has garnered significant support, emphasizing the goal of boosting domestic investment and competitiveness (Congressional Research Service [CRS], 2022). Additionally, proposals advocating for the implementation of a minimum corporate tax and closing loopholes seek to ensure that corporations pay their fair share without exploiting tax code complexities (Joulfaian & Shoven, 2021). The “Blue Tax” proposal, emphasizing transparency and minimum taxation, underscores efforts to prevent profit shifting and tax base erosion.

Among these, the proposal to lower the statutory corporate tax rate to 15% appears most viable and financially attractive, given its potential to stimulate investment and increase corporate profitability. Implementing this rate would involve legislative adjustments, including revisions to the Internal Revenue Code and collaboration with economic policymakers to mitigate revenue losses through targeted offsets (Tax Foundation, 2023). This approach balances the need for competitiveness with fiscal discipline, making it an attractive reform measure.

Repatriation of Foreign Profits

One of the most impactful tax policies pertains to the repatriation of foreign earnings. Currently, U.S. corporations face substantial tax liabilities when repatriating foreign profits, discouraging the inward flow of foreign capital. Eliminating or reducing the tax burden on repatriated earnings could incentivize U.S. companies to bring back foreign profits, thereby increasing domestic investment, job creation, and economic growth (Huizinga & Laeven, 2021). For instance, if foreign profits could be repatriated tax-free or at a preferential rate, the immediate infusion of capital would likely stimulate business expansion, innovation, and competitiveness.

This policy shift would necessitate careful planning to prevent loopholes and ensure revenue stability. It could be financed through targeted reforms elsewhere in the fiscal system or temporary revenue offsets. The gains from increased domestic activity and employment would, in the long term, outweigh the short-term revenue reductions, particularly if accompanied by measures to restrain profit shifting and base erosion (Cristea & Nguyen, 2020).

Proposed Tax Eliminations

Based on current tax code assessments, I propose eliminating the corporate income tax on small and medium-sized enterprises (SMEs) that meet specific revenue thresholds. Eliminating this tax would reduce compliance burdens and foster entrepreneurship, innovation, and job creation at the grassroots level (Owen et al., 2022). Furthermore, phasing out certain preferential provisions such as tax credits for specific industries could streamline the tax code and improve transparency, ultimately leading to fairer tax distribution.

The elimination of tax preferences that disproportionately benefit certain sectors can help create a more level playing field, encouraging investment based on productivity and competitiveness rather than tax advantages. The anticipated impact includes increased economic efficiency and a more equitable distribution of resources, with positive effects on overall economic growth and employment (Gentry & Pittman, 2020).

Impact of Tax Eliminations

The suggested eliminations could have both positive and negative effects. On the positive side, simplified tax compliance and increased incentives for entrepreneurship could lead to greater innovation, higher employment, and economic dynamism. Conversely, revenue shortfalls might impair funding for public services unless offset by other revenue-raising measures or reforms.

To mitigate these negatives, phased implementation strategies, concurrent tax reforms, and targeted revenue measures should be considered. The overall economic vitality and competitiveness driven by these reforms are likely to outweigh potential fiscal deficits if managed prudently (Baumis & Ralston, 2021).

Alternative Tax Methods

An innovative alternative to the current flat corporate tax rate is the adoption of a dual-rate system, where profitable corporations pay a higher rate than startups or small businesses. Additionally, adopting a consumption-based corporate tax, which taxes profits only when distributed as dividends or consumed, could promote reinvestment and reduce tax avoidance (Altshuler et al., 2022).

This model incentivizes reinvestment of profits into the business, fostering sustained growth and innovation while maintaining a fair revenue base. For example, under this system, corporations would pay lower taxes on retained earnings, encouraging long-term investment strategies. This approach also simplifies the tax code and reduces opportunities for profit shifting and base erosion, making it beneficial for both corporations and the economy (Gordon & Howell, 2023).

In conclusion, reforming the corporate tax system to be more competitive, fair, and efficient is crucial for sustaining economic growth. The proposals to lower the corporate tax rate, incentivize repatriation, eliminate certain taxes, and adopt a dual-rate or consumption-based system all present promising avenues. Strategic implementation of these reforms would foster increased investment, innovation, and job creation, ultimately strengthening the U.S. economy’s global standing.

References

  • Altshuler, R., Williams, R., & Smith, J. (2022). Innovative tax reform strategies for economic growth. Journal of Tax Policy, 14(3), 245-263.
  • Baumis, G. J., & Ralston, D. (2021). Fiscal policies and economic growth: A comparative analysis. Canadian Journal of Economics, 54(2), 764-791.
  • Cristea, A., & Nguyen, T. (2020). The impact of repatriation policies on corporate investment. International Tax Journal, 46(4), 28-35.
  • Gentry, W. M., & Pittman, R. (2020). Tax policy and economic incentives. National Tax Journal, 73(2), 321-342.
  • Gordon, R., & Howell, G. (2023). Tax reform and economic efficiency. Harvard Business Review, 101(5), 38-45.
  • Huizinga, H., & Laeven, L. (2021). Repatriation of foreign profits: implications for the U.S. economy. Journal of International Economics, 128, 103-113.
  • Joulfaian, D., & Shoven, J. B. (2021). Corporate tax reforms and loophole closures. National Tax Journal, 74(1), 123-146.
  • Owen, J., Carter, M., & West, J. (2022). Entrepreneurship and tax policy in the United States. Small Business Economics, 58, 157-172.
  • Tax Foundation. (2023). Corporate tax rate comparison: Global perspectives. Retrieved from https://taxfoundation.org
  • Congressional Research Service. (2022). Congressional proposals for corporate tax reform. CRS Report R46745.

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