Business Tax Issues in 2007

Publication Date: February 2007

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Banking and finance; Business

Type:

Abstract:

In recent years, business tax legislation has tended to focus on broad, structural issues and economic performance in general. For example, the 2003 tax cuts for capital gains and dividends were, in part, an incremental movement towards eliminating the double-taxation of corporate income that is a structural feature of the current U.S. business tax system. Also, these and other business tax cuts -- for example, temporary "bonus" depreciation -- were designed to provide a fiscal stimulus to spur an economy that remained sluggish after the 2001 recession. And in 2004, Congress enacted a set of business tax cuts that were generally aimed at boosting U.S. competitiveness through their impact on international trade and investment.

Early indications are that consideration of business tax policy in 2007 may focus on more narrow, sector-specific issues. And while overall economic performance is always of concern to tax policymakers -- particularly in the area of business taxation -- in early 2007 interest in business tax issues also appears to be driven by concerns about tax equity and by a search for tax revenue that would help reduce the federal budget deficit or offset tax cuts elsewhere. For example, energy taxation is being explored as a way to raise revenue as well as a means to stimulate investment in energy conservation and technology. Also, there appears to be considerable interest in restricting corporate tax shelters. Both Congress and the Administration have evinced an interest in tax cuts for small business -- cuts that some view as a way to counter the impact of minimum wage increases on small business. In February, both the House and Senate approved bills containing small business tax benefits (an amended version of H.R. 2 in the Senate, and H.R. 976 in the House). And there are some indications that Congress may consider legislation that would make the research and development tax credit a permanent rather than temporary part of the tax code.

This report will be updated as legislative events occur.