1. REFORMING U.S. INTERNATIONAL CORPORATE TAXATION Michael D. Williamson ITRN 603 Prof. Malawer April 14, 2015

2. Executive Summary -Problem: Currently, the U.S. taxes its firms on a worldwide bases. -Consequence: Taxing firms on income earned abroad discourages U.S. firms to invest in the U.S. -Remedy: The U.S. should adopt legislation that implements a territorial tax system. Tax Foundation Video on the basics of foreign taxes for U.S. firms.Video

3. Problems & Consequences 2012 J.P Morgan Study: U.S. multinational firms have over $1.7 trillion in non-repatriated foreign earnings, which may remain offshore permanently.Study Not repatriating foreign earnings: -lowers U.S tax revenues; -rewards foreign investment over U.S. investment.; and -increases compliance costs Taken together, these factors hinder employment and innovation in the U.S.

4. Policy Proposal: Move the U.S. to a territorial tax system BenefitsBenefits, according to the Senate Republic Policy Committee: -Allow U.S. firms to repatriate bring foreign income back to the U.S. without being taxed -Remove the tax disincentive for domestic investment with foreign income -Decrease the influence that tax considerations have on business decisions -Lower compliance costs, make it more likely that global businesses are located in the U.S. Taken together, these benefits may increase employment in the U.S.

5. Potential Criticisms of Territorial Tax Systems -According to the CBO, territorial tax systems lower U.S. revenueCBO -Broader U.S. corporate tax base Rebuttal: Employment gains, and its effects, may compensate -The Center on Budget and Policy Priorities says territorial tax system may facilitates tax evasion and shifting income to tax havensThe Center on Budget and Policy Priorities Rebuttal: Legislation could make it illegal to park income in tax havens

6. Works Consulted Chye-Ching Huang, et. al., “The Fiscal and Economic Risks of Territorial Taxation,” Center on Budget and Policy Priorities, Jan. 31, 2013, http://www.cbpp.org/files/1-31- 13tax.pdfhttp://www.cbpp.org/files/1-31- 13tax.pdf “Corporate Taxes: Advantages of a Territorial System,” Tax Foundation, Jan. 3, 2012, https://youtu.be/19dg7L5Zdsg https://youtu.be/19dg7L5Zdsg Emily Chasan, “At Big U.S. Companies, 60% of Cash Sits Offshore: J.P. Morgan,” Wall Street Journal, May 17, 2012: http://blogs.wsj.com/cfo/2012/05/17/at-big-u-s- companies-60-of-cash-sits-offshore-j-p-morgan/http://blogs.wsj.com/cfo/2012/05/17/at-big-u-s- companies-60-of-cash-sits-offshore-j-p-morgan/ “Options for Taxing US Multinational Corporations,” Congressional Budget Office, January 2013, https://www.cbo.gov/sites/default/files/43764_MultinationalTaxes_rev02-28-2013..pdf https://www.cbo.gov/sites/default/files/43764_MultinationalTaxes_rev02-28-2013..pdf “Territorial vs. Worldwide Taxation,” Senate Republican Policy Committee, Sept. 19, 2012, http://www.rpc.senate.gov/policy-papers/territorial-vs-worldwide-taxationhttp://www.rpc.senate.gov/policy-papers/territorial-vs-worldwide-taxation Images: http://goo.gl/qrpB61http://goo.gl/qrpB61; http://goo.gl/Kucfqs; http://goo.gl/OF391Jhttp://goo.gl/Kucfqshttp://goo.gl/OF391J