Business Tax Burdens and Tax Reform

Abstract

Tax reforms affect economic performance by changing incentives for business formation, expansion, and operation. The United States has the highest corporate tax rate among countries with advanced economies, and-despite offering significant additional deductions, exclusions, and tax credits-it imposes the heaviest tax burdens. This paper offers a new measure of corporate tax burdens based on information in tax expenditure budgets; this measure implies that the burden of U.S. corporate taxation in 2017 is equivalent to that produced by a corporate tax rate of between 31.7 and 34.8 percent, without additional deductions, exclusions, or tax credits. Efficient design of a business tax system encourages activities with beneficial economic spillovers and imposes lighter burdens on those industries and activities that are most responsive to taxation. Tax reforms have the potential to improve economic efficiency by adjusting the level and design of U.S. business taxes.

Measuring Risk Allocation of Tax Burden for Small and Micro Enterprises

“…Many other scholars have been actively promoting corporate tax cuts, but they have different opinions on the ways and effects of tax cuts. For example, Grubert and Altshuler [16] considered that changing the corporate income tax to personal income tax can significantly reduce the corporate tax rate; Hines Jr [17] considered that although the corporate tax rate in the United States provides a large number of additional deductions, tax exemptions, and tax credits, however, it creates the heaviest tax burden; Salaudeen and Atoyebi [18] demonstrated that the effect of tax reform was heterogeneous, which led to an increase or decrease in tax burdens in different industries.…”

Corporate Social Responsibility and Operating Performance: The Role of Local Character in Emerging Economies

“…Tax burden. A business environment with high tax rates increases organizational financial distress, discourages business establishment and business operation expansion [52], and decreases the amount of investment in non-economic activities, e.g., CSR practices [53,54]. For instance, anecdotes about the high corporate tax burden in emerging economies such as China, Russia, and the Ukraine, abound in the media and in reports [21,55].…”

“…On the contrary, tax breaks can provide relief to firms, so that they can introduce innovative CSR activities, which might enable them to undertake environmental product innovations, employee training, and safe production [56]. In this case, corporate resource utilization efficiency is improved to bring about superior performance [52].…”

Tax Burden Implication of Tax Reform

“…Additionally, an average of 22% of the federally collectible revenue in Nigeria from 2012-2015 accrues from firms chargeable under the CITA (FIRS, 2012, [13]), what happens to the tax burden of this single large group of tax payers should be of concern to any government in order to ensure an uninterrupted flow of revenue to maintain and finance development. Hines Jr., J.R. (2017) [14] also observes that taxes on business activities that discourage the formation and expansion of businesses, indeed, Spengel et al (2012) [2]; Hebows, S., Ruf, M., and Weichenvieder, A.J. (2011) [15] find tax to determine how attractive a country is Open Journal of Business and Management as a destination for investments.…”

“…sole variable of this study is Tax Burden. Following Hine Jr, J.R. (2017)[14];Anderson, J.F (2013) [20] and several other authors, tax burden is estimated using the Effective Tax Rate (ETR). The concept of ETR developed out of the need to ascertain the actual tax burden borne by tax payers in view of the failure of the Statutory Tax Rate (STR) to effective capture the whole essence of a tax system (NIcodeme, 2001)[31].…”