Well, it’s not hard to state that tax reform must simplify the tax code. Instead, Congress, at present, is debating some of the new ways for raising revenue, which might make the tax code even more complex and difficult to administer.
The newer proposals will be imposing an alternative form of minimum tax on the corporate book income. It will apply one excise tax on the stock buybacks, which will levy a surcharge on higher earners. It might even give rise to a tax on the unrealized capital gains for the billionaires out there in the country. All these points are highly complex and unrealistic to raise revenue.
In place of learning towards these complex rules to raise revenue, lawmakers must prioritize on broadening the base of the tax and then eliminate expenditures which are not related to cost recovery, deferral and international taxes. Get to learn more about that from William D King right away!
The revenue increases can easily be well structured for improving the present tax code. It can be done by making it simple and neutral across all households and industries.
William D King talks about alternative minimum tax:
There has been one proposal announced and it talks about booking minimum tax, which will need firms to make at least$1 billion in profit to pay around 15% of accounting profits in taxes.
As per the legislative description as released by the experts, the tax might apply to around 200 countries roughly.
This proposal is going to be the latest of multiple taxes, which are associated with the book income like the boom minimum tax by thee President earlier in 2021 and thee surtax on book profits that was included by Sen. Warren.
Ways to calculate:
There are some ways in which you get to calculate the corporate profits and define it as the revenues minus costs.
- The first one is when you can opt for the financial accountant rules, which are designed for matching the cost deductions to revenues that the expenses will generate by producing book income.
- The second one is using the tax laws, which have been enacted by thee Congress with the intention to raise revenue for the government based activities and encouraging or penalizing some behaviors to produce taxable income.
These two separate approaches will result in multiple measures of the corporate profits. In some years’ time, it will lead to some firms paying no taxes whatsoever even when they have book profits under their name.
The differentiations to follow:
The two major policy types will create differences between the taxable and book income. The first one is structural like faster deductions for the physical capital investments to measure the firm’s profit accurate on cash flow.
The second one is deductions for past losses to ensure that the firms will be taxed on profits over time and won’t be penalized for losses which will not match with the calendar years. Focusing on these points will help you to understand the untested policies well.
