Rough Road to Even a 28% Corporate Tax Rate

We have heard suggestions for dropping the corporate income tax rate from its current 35% to perhaps even as low as 15%. Typical suggestions seem to be for 28% or 25%. President Obama and others will require that any decrease be revenue neutral.

Democrats on the House Ways and Means Committee asked the Joint Committee on Taxation to estimate what the rate could drop to if all tax expenditures were repealed either just for corporations or for all business taxpayers. The JCT's preliminary data was released earlier this month. It indicates that the lowest rate would be 28%, although it a longer budget window is used, it likely has to be higher.

I have a short article in the AICPA Corporate Taxation Insider (11/10/11) on the data and its implications. The vast majority of the "pay for" are timing items, such as using slower depreciation. That doesn't really raise revenue (at least in the long run). Some of the repealed tax expenditure are really simplifications, such as allowing small C corporations to use the cash method rather than the accrual method.

Links to the report and critique of this approach to pay for a lower rate, are included in the article. Also see 11/2/11 post.