NTUF Releases New Study on Base Erosion

New Study Helps to Understand Policy Options to Address Base Erosion

National Taxpayers Union Foundation (NTUF) has released a new study examining the most prominent policy options for addressing base erosion. Due to the United States’ high corporate tax rate and onerous compliance burdens, the tax base has been gradually shrinking. Any credible tax reform plan must address these problems. NTUF’s new study explains how each option would seek to reduce base erosion and compares the impact they would have on the economy and the deficit.

As Congress works to overhaul the nation’s tax system, NTUF’s Associate Policy Analyst Andrew Wilford said, “Tax reform involves many difficult-to-grasp but important concepts with a language all their own. Our goal is to provide clarity on the often-confusing terminology, and explain the basics of proposals on the table to fix our overly-complex tax code.”

The “border adjustment tax” would have represented the most significant directional shift in the history of U.S. corporate taxation. Now that it has been scrapped, attention will turn to alternative reforms including former Congressman Dave Camp’s “Option C” plan, variations on Camp’s plan, or a value-added tax plan. While those options would entail significant reforms of tax laws, one plan in Congress would seek to vastly increase enforcement within the existing tax code.

“The leading options to address base erosion include trade-offs between revenues raised and economic growth,” said Director of Research Demian Brady. “Lawmakers must decide for themselves on the merits of each of these proposals, but the need for reform is clear. Congress cannot wait for bureaucrats to try to step in and solve the problem through administrative rules or regulation.”
What’s the Deal with Base Erosion? (PDF)

Base Erosion Options: Side-by-Side Chart

This paper is the first in a series on understanding tax reform, designed to provide non-technical explanations of highly technical tax policy issues – and options for addressing them. Future topics will include analysis of full expensing and the mortgage interest deduction.