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How to fix the corporate tax code (but not in one blog post)

Tax experts and people in the business community pretty much agree that the corporate tax code is a mess that needs fixing. And it's not just companies complaining the corporate tax rate is too high.

The broader worry is that the code distorts business behavior in ways that are bad for the economy. Companies borrow more and rack up higher debt because interest is deductible. They don't bring money earned overseas back to the United States to invest in factories and hire workers because they don't want to pay income taxes upon repatriation. Plus, the code is so complex that companies spend an estimated $40 billion a year on administration and compliance. That's more than 12 percent of the revenues collected.

The President's Economic Recovery Advisory Board released a report last Friday that begins to tackle some of this. One of the group's three broad goals, in addition to simplifying the tax code overall and improving compliance, is reforming the corporate tax system.

There aren't specific recommendations in here -- it's a lot of noodling around with ideas and pointing out pro and cons to various approaches. I won't try to tackle the whole thing in one post, so I'll break it off in pieces. First up tomorrow: reducing the marginal corporate tax rate.

By Jia Lynn Yang  |  August 30, 2010; 3:33 PM ET
Categories:  Corporate taxes , Tax expenditures  
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