Morning Brief: Multinationals Seek Foreign Income Tax Break

Large multinational firms continue to lobby for additional tax breaks on overseas income (Bloomberg). Business groups are trying to convince House Ways and Means Committee chairman Dave Camp, who supports cutting the corporate tax rate, to loosen offsetting rules he has proposed that could reduce their flexibility to shift income to lower-taxed locales. Options proposed by Camp include tighter rules for taxing excess profits on intangible assets such as patents and trademarks, and adding U.S. taxes on those assets to foreign taxes to reach a minimum of 15 percent.

The United States currently has highest statutory corporate tax rate in the world—35 percent for federal taxes only—though the actual rates paid vary significantly. This CFR Backgrounder by Jonathan Masters discusses the effect of current policy, and proposals for U.S. Corporate Tax Reform.

Accounting Rules Will Not Curb Cyclicality

The chairman of the International Accounting Standards Board (IASB) stated that banking regulators cannot place their faith in new accounting rules to curb boom and bust cycles and argued that criticisms of current rules are only partially justified (FT). The IASB and the United States’ Financial Accounting Standards Board (FASB) are two years behind schedule on accounting reforms, including new loan impairment rules that proponents hope will force banks to more quickly face the consequences of bad loans.

Corporate regulation and taxation. Read more from top economists and business experts on solutions for addressing corporate tax reform.

Some Lawmakers Seek to Undo Automatic Cuts

Senator Lindsey Graham (R-SC) and Secretary of Defense Leon Panetta are giving dire warnings about pending defense cuts (NYT). While the Obama administration and Congress already agreed to $450 billion in military cuts over ten years, the failure of last fall’s supercommittee means an automatic additional $600 billion reduction under the Budget Control Act of 2011. The law exempts war costs, personnel levels, and military pay, and therefore concentrates cuts in areas such as research, weapons procurement, and operations. However, the House approved an annual defense policy bill in May that exceeded these spending constraints.

As the United States continues to run budgets with high deficits, politicians debate different plans to reduce government costs and to raise revenue. This CFR Backgrounder by Jonathan Masters outlines the competing policy paths on federal fiscal reform, and the global consequences for failing to bring down U.S. debt.

Debt and deficits. Read more from experts on the challenges in reducing U.S. debt.

Alternatives to Clean Energy Subsidies

The editorial board of the Washington Post advocates for either a carbon tax or more responsive subsidies rather than simply renewing the wind production tax credit. They argue that current subsidies could be replaced by a system that rewards the renewable energy sources that are lowest cost and cite subsidy proposals from “Beyond Boom & Bust,” a report written by members of the Breakthrough Institute, Brookings Institution, and World Resources Institute.

Infrastructure. Read more on how upgrading the nation’s aging network of roads, bridges, airports, railways, and water systems is essential to maintaining U.S. competitiveness.

The Morning Brief is compiled by Renewing America contributor Steven J. Markovich.