ASSESSING US GLOBAL TAX COMPETITIVENESS AFTER TAX REFORM

This paper assesses the impacts of the 2017 tax reform act on US. competitiveness in terms of changes in incentives for US. domestic corporate investment and the taxation of US.-headquartered companies and their foreign subsidiaries relative to foreign-headquartered companies. The reduction of the US. statutory tax rate has significantly improved domestic investment incentives as measured by marginal and average effective tax rates, assuming an average use of debt and equity. In addition, the partial adoption of a participation exemption system in some cases can allow US companies now to compete globally on equal tax terms with foreign-headquartered companies. However, a new US. global minimum tax imposes current taxation on certain foreign income previously eligible for deferral and, as a result, may disfavor US. ownership of high-return foreign assets relative to foreign-headquartered companies. Average effective tax rates are also reduced by a new domestic incentive for undertaking high-return investments in the United States. Even so, US. research incentives continue to lag behind those available in many other major countries, taking into account special deductions, tax credits, and patent box regimes.