Question

The international tax code affects the United States economy. In this discussion, you will comment on the complexity of the tax code and how the international tax code interacts with the U.S. tax code.

It was mentioned in our textbook that Pam Olson, former Treasury Assistant Secretary for Tax Policy, was quoted as saying, “It is difficult to predict the future of an economy in which it takes more brains to figure out the tax on our income than it does to earn it.” Read Testimony of Pamela Olson Before the Senate Committee on International Tax Policy and Competitiveness and comment on your experience with the complexity of the tax code. Why should it change to become more competitive with other countries? Why is international tax so important to the U.S. tax code? Cite specific code sections that you believe should change.

Answer 1

"The lunatic complexity of the US tax code is proof of legislative incompetence." because of the lobbying of private interests for special treatment. This is the irony of the US tax code. The conservatives and business folk complain of its complexity, but yet the complexity is primarily a product of the lobbying of business folks!Principles of tax law often conflict. For example, taxing all income on an equal basis is generally considered to promote both a more efficient and fair tax system, but carried to an extreme it can add to complexity.There are many items in the tax law that add significant complexity with little gain in some other area like equity or efficiency.

The most basic goal of tax policy is to raise enough revenue to meet the government’s spending requirements with the least impact on market behavior.The legislation allows for the full up-front cost of capital investments to be deducted. The previous system required such deductions to be spaced out over several years. Any countries have recognized this and have reformed their tax codes. Over the past few decades, marginal tax rates on corporate and individual income have declined significantly across the Organisation.

Encourages companies to keep income overseas. Because U.S. corporations are taxed only when they repatriate earnings, the current tax system encourages companies to keep their foreign income overseas. A corporation headquartered in the U.S. must pay the corporate income tax on all its income, regardless of whether it is earned in the U.S. or overseas. The corporation pays this tax when the foreign earnings are “repatriated” by bringing the income back to the U.S. This is known as “deferral,” because the income tax owed can be deferred until a later date when the income is repatriated.When a corporation chooses to repatriate earnings and pay the U.S. corporate income tax, the law allows a foreign tax credit to offset a portion of the amount of U.S. tax that the corporation would otherwise have to pay.

the method of accounting from which the change is made was used by the taxpayer in computing his taxable income for the 2 taxable years preceding the year of the change, and the increase in taxable income for the year of the change which results solely by reason of the adjustments required by subsection (a)(2) exceeds $3,000,and also section 3(A) AND 3(B).