Our Finance Guide
  • Home
  • Loans
  • Tax
  • Credit Cards
  • Investing
No Result
View All Result
  • Home
  • Loans
  • Tax
  • Credit Cards
  • Investing
No Result
View All Result
Our Finance Guide
No Result
View All Result
Home Tax

The Minimum Book Tax is Not a “Second Best” Reform

admin by admin
December 24, 2021
in Tax
0
The Minimum Book Tax is Not a “Second Best” Reform

Negotiations over the Build Back Better Act have stopped after Senator Joe Manchin (D-W.Va.) said he would not vote for the current version of the bill. Lawmakers are hoping to restart negotiations over the president’s spending package in January. The current version of the bill includes new spending on family benefits, climate, infrastructure, and healthcare paid for with tax increases on high-income households and corporations. The largest revenue raiser in the House version of the bill is a 15% minimum tax on large corporations’ book income. The minimum tax is being pursued after lawmakers dropped the proposal to raise the corporate income tax rate. Some proponents have likened the book tax to a “broaden-the-base, lower-the-rate” reform, which reduces distortions by eliminating or scaling back deductions in the tax base. This argument, however, is based on a misunderstanding of how the book tax would impact incentives. The tax can easily increase distortions for some corporations rather than reduce them.

Under the proposed tax, corporations with net income over $1 billion would be required to pay the greater of their ordinary corporate income tax liability, or 15% of adjusted financial statement or “book” income. Certain adjustments, like net operating losses, could still reduce book income, and general business credits could offset book tax liabilities. Additionally, payments of the book tax will generate book tax credits, which would be carried forward to offset future ordinary corporate tax liability.

Related articles

Score Payday loans Relief into the Denver, Texas within the super easy

Where Is the Economy Heading? Velocity of Money Provides Clues

Under an ideal base-broadening and rate-reducing corporate tax reform, lawmakers would eliminate deductions and credits that reduce corporate effective tax rates and use that additional tax revenue to reduce the statutory tax rate. Such a reform would make the tax code fairer by ensuring that businesses in similar economic situations face similar tax burdens. It would also increase economic efficiency by reducing the influence the corporate tax has over business decisions.

One distortion that a “broaden-the-base, lower-the-rate” tax reform tries to address is the differential tax treatment of various investments. Under current law, the effective tax rate on new investment varies significantly across types of assets—as shown in Column 1 in the table below. Equipment that qualifies for bonus depreciation faces a much lower effective tax rate (-7.7%) than a structure (4.6%), which is typically depreciated over 39 years. Overall, the standard deviation is 13.7 percentage points. This differential tax burden can distort the types of investments that companies make.

Proponents of taxing book income may see it as a way to address this distortion. Under financial accounting standards, companies generally deduct the cost of new investments over the period assets are expected to generate income. Matching the timing of income and deductions for the investment means that a tax will apply, roughly, to the economic income an asset generates. As a result, assets will face an effective tax rate closer to the statutory rate. This means that while the effective tax rate on many investments under a book tax would be higher overall, the tax would result in a more even distribution of effective rates—as show in Column 2 in the table below.

 

Read more…

admin

admin

Related Posts

Score Payday loans Relief into the Denver, Texas within the super easy

You can find forms of cash advance save one to Texas citizens can use to save money. Cash advance will appear to be what you want...

Where Is the Economy Heading? Velocity of Money Provides Clues

Retiring in a Slowing Economy? 3 Steps Can Help You PrepareVelocity of money is the rate at which money is being spent in the economy. It...

The Surprising Asset You Can Use for Tax-Loss Harvesting

Bonds have taken a beating in 2022, but the damage to your portfolio may be less than meets that eye, provided you handle those losses in...

City Council may consider a small property tax hike

Evanston City Council members may be returning to consider a small property tax increase to put police and fire pension funds on a 100% track toward...

Business Tax Credits Your Business May Qualify For

One of the most complicated parts of running a small business is figuring out your taxes. Most business owners are worried about ensuring they pay enough...

Next Post
Best Bad Credit Credit Cards for December 2021

Best Bad Credit Credit Cards for December 2021

How To Add International Stocks To Your Investment Portfolio

How To Add International Stocks To Your Investment Portfolio

What Biden’s Latest Student Loan Relief Means For Your Student Loans

What Biden’s Latest Student Loan Relief Means For Your Student Loans

No Result
View All Result

Subscribe Us

By clicking submit, I authorize Our Finance Guide and its affiliated companies to: (1) use, sell, and share my information for marketing purposes, including cross-context behavioral advertising, as described in ourTerms of Service and Privacy Policy, (2) supplement the information that I provide with additional information lawfully obtained from other sources, like demographic data from public sources, interests inferred from web page views, or other data relevant to what might interest me, like past purchase or location data, (3) contact me or enable others to contact me by email with offers for goods and services from any category at the email address provided, and (4) retain my information while I am engaging with marketing messages that I receive and for a reasonable amount of time thereafter. I understand I can opt out at any time through an email that I receive, or by clicking here.

RECOMMENDED

Will student loan forgiveness ever happen? What we know so far
Loans

Will student loan forgiveness ever happen? What we know so far

Biden team insists taxes won’t go up for most people
Tax

Biden team insists taxes won’t go up for most people

CATEGORIES

  • Credit Cards
  • Investing
  • Loans
  • Tax
  • Uncategorized

Subscribe Us

By clicking submit, I authorize Our Finance Guide and its affiliated companies to: (1) use, sell, and share my information for marketing purposes, including cross-context behavioral advertising, as described in ourTerms of Service and Privacy Policy, (2) supplement the information that I provide with additional information lawfully obtained from other sources, like demographic data from public sources, interests inferred from web page views, or other data relevant to what might interest me, like past purchase or location data, (3) contact me or enable others to contact me by email with offers for goods and services from any category at the email address provided, and (4) retain my information while I am engaging with marketing messages that I receive and for a reasonable amount of time thereafter. I understand I can opt out at any time through an email that I receive, or by clicking here.

© 2025 Our Finance Guide, All Rights Reserved.

  • Contact Us
  • Privacy Policy
  • Terms Of Service
  • Unsubscribe
  • Privacy Choices
No Result
View All Result
  • Home
  • Loans
  • Tax
  • Credit Cards
  • Investing

© 2025 Our Finance Guide, All Rights Reserved.

Skip to content
Open toolbar Accessibility Tools

Accessibility Tools

  • Increase TextIncrease Text
  • Decrease TextDecrease Text
  • GrayscaleGrayscale
  • High ContrastHigh Contrast
  • Negative ContrastNegative Contrast
  • Light BackgroundLight Background
  • Links UnderlineLinks Underline
  • Readable FontReadable Font
  • Reset Reset