Risks and opportunities for US business
Individual tax issues will drive tax reform, but corporate tax issues will be an important element as policymakers consider the best growth strategy of the US economy and the international competitiveness of US business.
Tax reform will be influenced in part by political ideology, but the coming need for tax reform is entirely practical. Virtually all the individual tax relief enacted in 2001 and 2003 will expire December 31, 2010, resulting in a tax increase of $250 billion per year starting in 2011 unless the tax cuts are extended.
Congress also has been unable to find a permanent solution to the expanding reach of the individual alternative minimum tax (AMT). The AMT, once intended to prevent a tiny percentage of high-income taxpayers from paying no tax, now directly hits the middle class due to the failure of Congress to adjust the AMT for inflation over decades.
While Congress is forced to deal with these individual income tax "time bombs", business tax issues lie just below the surface. The US corporate tax rate—now second highest in the 30-member Organisation for Economic Co-operation and Development (OECD)—is believed by many policymakers to be a deterrent to US economic growth. Growing attention is also being placed on how US taxes influence foreign operations of US companies and how these operations affect domestic jobs and investment.
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