Republican Presidential candidate Jeb Bush released his tax plan today—and there’s plenty for businesses to ponder:
• The corporate tax rate would drop from 35 percent to 20 percent, “which is five percentage points below China’s,” he noted in a Wall Street Journal op-ed.
• A territorial tax so American businesses only pay taxes on the income earned in the country where the revenue was generated.
• A repatriation holiday of 8.75 percent, to be paid over 10 years.
• Eliminating the borrowing-cost deduction so companies would no longer depreciate business investments over a number of years. “That deduction encourages business models dependent on heavy debt,” Bush wrote.
Most of the concepts in Bush’s corporate tax plan enjoy support in the business community. However, allowing companies to immediately deduct investments would likely prove a major challenge to implement. That’s because it would change how business taxes are calculated by taxing net cash flow instead of profits, and convincing Congress to agree on such a profound change to the tax code would be difficult. Some economists and politicians believe eliminating the borrow-cost deduction would encourage greater business investment and economic growth.