13.9: Business Tax
Tax businesses by a levy on domestic net cash flow. Other Information:
Taxation of Businesses. The tax on businesses is a simple levy on domestic net cash flow so that all compensation provided
to employees and all purchases from other businesses are deducted from gross domestic receipts. In addition to its great simplification
compared to the current income tax, this means that businesses can immediately deduct purchases of new productive equipment,
thus eliminating a tax bias against business investment. All other special provisions and credits in existing law are repealed
except for the Alternative Simplified R&D tax credit, which is retained in its current form. Family businesses in particular
are able to grow without the uncertainty or burden of dealing with the death tax, which is repealed. After a brief transition
period, the tax rate on businesses matches the rate for individuals. During the transition period, the tax rate on businesses
declines from current law, 35 percent, a percentage point per year until the business tax rate matches the individual rate.
From that point forward, individual and business rates will be the same The business tax base includes only income generated
by domestic sales of goods and services. It excludes all foreign-source income, which is taxed in the foreign jurisdictions
according to their laws and systems. The tax is also border-adjustable, which means that the federal taxation of exports and
imports is adjusted to level the playing field between foreign and domestically produced goods and services. Specifically,
the domestic tax is lifted from exports and levied on imports, normalizing tax levels between countries much as a series of
locks on a canal raises or lowers boats so they can travel from point to point.
Indicator(s):
|
