Number: RL34245
Title: Tax Treaty Legislation in the 110th Congress: Explanation and Economic Analysis
Authors: Donald J. Marples, Government and Finance Division 
Abstract: Economic theory suggests there is an economically optimal U.S. tax rate for foreign firms that balances tax revenue needs with the benefits that foreign investment produces for the U.S. economy. Under current law, the treaty-shopping arrangements foreign firms in some cases undertake may combine with corporate income-tax deductions to eliminate U.S. tax on portions of their U.S. investment. In these cases, economic theory suggests that it is likely added restrictions on treatyshopping such as contained in the farm bill would improve U.S. economic welfare. This analysis, however, does not consider possible reactions by foreign countries where U.S. firms invest, nor does it consider possible abrogation of existing U.S. tax treaties.
Pages: 9
Date: Updated May 22, 2008