Tax Reform in a Global Economy: Shifting the Tax Burden

Tax reform is President Bush's priority as his second term progresses. This undertaking is ideologically problematic, economically complex and politically risky. It does, however, offer an opportunity to correct some systemic problems in the tax system. The shift of taxes by corporations to individuals has been in part a result of multinational companies exploiting low tax rates in foreign nations. Tax reform that taxes businesses on their economic activity in the United States rather than profits could correct this. This would be a backdoor approach to a consumption tax and would bring the U.S. tax system more in line with that of other countries. It could also provide much-needed funds to correct problems in the individual income tax structure such as the alternative minimum tax.