I'll have more on this later, but a few things to consider now:
1. Would Congress really repeal ALL tax expenditure for corporations? The largest revenue raiser by far in the list of replacing MACRS depreciation with ADS depreciation (straight-line with longer lives). Just over 70% of the revenue raised to cover the "cost" of a 28% rate (about $71 billion per year) is from this MACRS change. Won't less favorable depreciation than we have now harm international competitiveness?
2. Won't there by some transition rules? They cost extra.
3. What will be the cost of other business entities that have a rate higher than 28% converting to C corporations?
4. Some tax expenditures, such as allowing small C corporations to use the cash method rather than the accrual method are for simplification purposes? What is the purpose of removing them?
5. Other than some credits that would go away, the changes mostly appear to be timing differences. This really doesn't raise any revenue in the long run. In fact, the JCT points out that if you look beyond a 10-year budget estimate, the revenue neutral rate is likely higher than 28%. Note that many credits are not included in the list because the projections cover 2012 - 2021 and many credits, such as the research credit expire before 2012.
For more information (again, I'll have more soon when an article of mine is published), see
- "Break-Free Corporate Tax Code Misses Republican Rate Goal," by Steven Sloan and Richard Rubin, Bloomberg, 11/2/11
- Democrats press release (11/2/11)
- JCT release with the "very preliminary" data
- Chairman Camp's Comprehensive Tax Reform proposal