Experts agree the TCJA international aspects are overwhelmingly problematic. DBSFA is a fundamental improvement because it would:
- Simplify the amount of corporate profit the U.S. taxes with a simple formula. Individual states would similarly benefit from this simplification and would stop crafting complicated legislation which achieves poorer results.
- Level the playing field between purely domestic businesses and multinational enterprises. Inversions would be pointless because the company would pay the same tax on profits regardless of tax planning. All other proposals allow the accounting method known as transfer pricing. Most practitioners view minimizing the taxes paid by the MNE as the goal of transfer pricing.
- This territorial system eliminates the tax incentives to locate jobs, factories, and corporate headquarters offshore, boosting employment, exports, and U.S. tax revenue.
- Estimated to increase revenue by $600 billion over ten years at the 21% rate. It would reduce the estimated increased deficit from about $1.1 trillion to perhaps as little as $500 million. Shifting to a sales-based single-factor formulary apportionment will raise revenue without raising rates because it will stop U.S. and foreign MNEs from being able to place their profits offshore to avoid U.S. taxes.