A Common Sense Corporate Tax: The Case for a Destination-Based, Cash Flow Tax on Corporations

65 Pages Posted: 8 Feb 2012 Last revised: 4 May 2012

See all articles by William B. Barker

William B. Barker

Pennsylvania State University, Dickinson Law

Date Written: February 8, 2012

Abstract

The U.S. corporate income tax is flawed both domestically and internationally. This paper outlines a radical paradigm shift from corporate income tax to a destination-based cash flow tax on corporations. This tax adopts a more economically coherent and justifiable tax base for corporations which overcomes the principle theoretical and practical defects of the income tax by eliminating all differences in characterization of income and expense in the tax base, eliminating completely the foreign tax credit or deductions for foreign taxes and substantially reducing the incentives for transfer pricing abuses. The destination cash flow tax accomplishes these goals in a way that reverses the bias in the present income tax system in favor of foreign production and supports domestic business activity by both foreign and domestic corporations by promoting the U.S. production of goods and services and research and development, and the U.S. location of headquarters and administration.

Suggested Citation

Barker, William B., A Common Sense Corporate Tax: The Case for a Destination-Based, Cash Flow Tax on Corporations (February 8, 2012). Catholic University Law Review, Forthcoming, Penn State Law Legal Studies Research Paper No. 1-2012, Available at SSRN: https://ssrn.com/abstract=2001578

William B. Barker (Contact Author)

Pennsylvania State University, Dickinson Law ( email )

150 S College St
Carlisle, PA 17013
United States

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