Question

Read the Reuters article below and respond to the comprehension questions .

How did tax reform make the US a better place for capital investment?

Answer 1

Since the new law reduces marginal tax rates, decreases consumer cost of capital, and allows other regulatory changes, the bill has had a positive effect on the American economy. The legislation's most significant pro-growth component was the permanent cut in the U.S. corporate tax rate in 2018 to 21 per cent. This lowered capital costs, and increasing expenditure and productivity. It made the U.S. a more profitable place to invest and a global corporation to headquarter in. The alternative minimum corporate tax (AMT) is abolished.

In addition, a 20 per cent deduction is provided to pass-through companies, ensuring that the tax rate is 4/5ths of what it would otherwise be. A 25 per cent bracket taxpayer will therefore have an effective marginal tax rate of 20 per cent on its pass-through income. However, this exclusion is not allowed for other service businesses in the fields of medicine, law, accounting, sports, financial services, brokerage services or any 'company' where the main asset of such company or trade is the prestige or ability of one or more of its employees or owners or includes the production of investment and investment services

The tax bill substantially shifted the US tax system into a territorial structure. It considers previous overseas earnings repatriated from which taxes were deferred and taxes them at a reduced rate. In included a number of basic erosion prevention provisions which effectively retain aspects of the current US tax system worldwide. Overall, these laws made the U.S. a more competitive place to headquarter a multinational company and, in conjunction with significantly reduced corporate tax rates, dramatically decreased revenues, and international corporate acquisitions by U.S. companies.