Excavating Layers Of The Tax Cuts And Jobs Act Of 2017

"The 2017 Tax Act, sometimes called the Tax Cuts & Jobs Act, has been heralded by some as historic reform and by others as Armageddon. This Collection analyzes the Act, exploring the process by which it was passed, the values that undergird its policies, and how specific provisions will affect the structure of the U.S. and global economy moving forward." Thus begins a five-paper "Forum: Reflections on the 2017 Tax Act" from the Yale Law Journal(dated October 25, 2018)

Michael J. Graetz writes the "Foreword—The 2017 Tax Cuts: How Polarized Politics Produced Precarious Policy." He touches on a number of the themes mentioned in the two papers by Joel Slemrod and Alan Auerbach in the"Symposium on the Tax Cuts and Jobs Act" that appeared in the Fall 2018 issue of the Journal of Economic Perspectives: yes, the US corporate taxation needed both lower rates and more sensible treatment of multinational companies, but in many ways the new tax bill created a muddle--and a muddle that will lead to substantially higher budget deficits. Here's a flavor of Graetz (footnotes omitted throughout): 

"The Democrats’ complaints about the law’s reduction in the corporate tax rate from 35% to 21% ring hollow. Democrats themselves had long realized that the U.S.’s exceptionally high corporate tax rate in today’s global economy—with highly mobile capital and intellectual property income—invited both U.S. and foreign multinational companies to locate their deductions, especially for interest and royalties, in the United States, and to locate their income in low- or zero-tax countries. This is obviously not a recipe for economic success. Both before and after the legislation, Democrats urged a corporate tax rate of 25% to 28%; meanwhile, Donald Trump asked for a 15% rate.So, even if Democrats had been involved in the legislative process, the 21% rate that we ended up with would be in the realm of a reasonable compromise. ... [A] significantly lower corporate rate has been long overdue, and raising it would be a mistake. If Democrats are unhappy with the distributional consequence that a corporate tax cut will benefit high-income shareholders, the appropriate remedy––given the mobility of business capital, businesses’ ability to shift mobile intellectual property and financial income to low-tax jurisdictions, and the challenges of intercompany transfer pricing––is to increase taxes at the shareholder level, not to increase corporate tax rates. ...
Congress’s greatest challenge in crafting this tax legislation was figuring out what to do about the international tax rules. ... Congress confronted daunting challenges when deciding what rules would replace our failed foreign-tax-credit-with-deferral regime. There were essentially two options: (1) strengthen the source-base taxation of U.S. business activities and allow foreign business earnings of U.S. multinationals to go untaxed; or (2) tax the worldwide business income of U.S. multinationals on a current basis when earned with a credit for all or part of the foreign income taxes imposed on that income. Faced with the choice between these two very different regimes for taxing the foreign income of the U.S. multinationals, Congress chose both. ...
No doubt analysts can find provisions to praise and others to lament in this expansive legislation, but we should not overlook its most important shortcoming: its effect on federal deficits and debt.  ...
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