The U.S. corporate tax system, largely shaped by the Tax Cuts and Jobs Act of 2017, and enhanced by provisions of the Inflation Reduction Act, provides a globally competitive tax rate that encourages companies to invest in America and benefits U.S. workers, families, and communities.  Policymakers at all levels should maintain and build upon this successful tax system to encourage investment in American businesses.

It is important that federal tax policy encourages investments in private sector research and development (R&D) to ignite innovation, create jobs, and increase our global competitiveness.  Congress should prioritize reinstating the ability for businesses to deduct R&D and software development expenses in the year they are incurred.  Congress should also prioritize a permanent extension of full expensing for capital assets so cost recovery occurs in the year investments are made.  This is a very important policy to help curb the impacts experienced during times of high inflation and higher interest rates that increase the cost to deploy capital expenditures.

Policymakers should also seek opportunities to support startups and entrepreneurs such as promoting stock ownership, encouraging equity sharing for employees of startups, and preserving the current tax treatment of Qualified Small Business Stock.  Congress should also make targeted reforms that allow startups to bring forward the value of their tax assets and provide fast and efficient capital availability.  We also support the permanent exclusion of capital gains taxes on investments in startup businesses that are held for more than five years.

Policymakers must ensure tax policies do not hinder innovation and growth.  Congress must address the 1099-K reporting threshold before it impacts millions of Americans, such as casual sellers who use online marketplaces to sell used goods without generating taxable income.  Additionally, U.S. policymakers must work together on the Organization for Economic Cooperation and Development’s inclusive framework to develop a consensus income tax-based solution.  This is especially important considering the threat of discriminatory digital services taxes, including from Canada, which should be challenged appropriately by the U.S. Government.  Similar targeted taxes proposed against the digital economy by state legislatures or taxing agencies should be vigorously defended against and defeated to ensure this activity is not competitively disadvantaged in the global economy.

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