The dynamics of great power competition are closely intertwined with two key components of the 2017 tax cuts. While tariffs often take center stage in discussions around tax reform and strategic competition with China, the 100 percent bonus depreciation and R&D amortization provisions in the Tax Cuts and Jobs Act (TCJA) deserve equal attention.
- Expiring Individual Tax Cuts: It’s no secret that the major individual tax cuts and reforms introduced under the TCJA are set to expire soon. While the spotlight may be on these changes, the business provisions within the act play a crucial role in shaping the U.S. economy’s global standing, particularly in relation to China.
- Comparing Corporate Taxes: On the surface, the United States and China seem to have similar corporate tax rates. With a federal corporate income tax rate of 21 percent for the U.S. and 25 percent for China, the difference may seem negligible. However, the true contrast lies in the tax code’s intricacies. China offers numerous tax exemptions for specific industries and regions, impacting the effective tax rates for businesses.
The underlying design of the corporate tax base is pivotal in understanding how these tax systems influence the economy. A crucial aspect is how investment costs are deducted by firms, which has far-reaching implications for economic growth and competitiveness.
As we navigate the complexities of tax policies and their implications on strategic competition, it is essential to stay informed and engaged. Subscribe to our newsletter for expert insights on tax policies impacting you directly. Let’s stay informed and empowered in shaping the future of global economic landscapes.
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