Corporate Taxation

The Accord replaces the current 21% statutory rate and arm's-length transfer pricing regime with a 30% rate (Years 1-5), 28% (Year 6+) and Sales-Factor Apportionment, supplemented by a 20% Book Minimum Tax and a 5% Stock Buyback Excise.

Sales-Factor Apportionment (SFA)

Tax liability is calculated strictly on the percentage of global sales occurring in the United States. If 40% of a firm's global sales are US-based, 40% of global profit is US-taxable. This neutralizes offshore IP havens, eliminates transfer pricing games, and ends "nowhere income." Moving headquarters to Dublin saves $0 if the customer remains in New York.

Book Minimum Tax

20% on financial statement income for firms with >$100M in revenue. This replaces and supersedes the current Corporate AMT (15% on >$1B book income). The lower threshold captures approximately 5,000 additional firms that currently exploit the gap between taxable income and reported earnings.

Stock Buyback Excise

5% on the gross value of all share repurchases. Current rate: 1%. Behavioral response: buyback volume contracts ~20-30%, partially offset by increased dividends (taxable to recipients under Schedule A/B). Net revenue gain reflects contraction.

Stress Test: Is $0.87T Realistic?

The $0.87T corporate tax estimate deserves scrutiny. It represents a +$0.32T increment over the CBO baseline of $0.55T. The buildup:

Rate effect: Raising the statutory rate from 21% to 30% (Years 1-5), 28% (Year 6+) on the existing taxable income base (~$2.8T) produces ~$252B in additional revenue before behavioral response in the initial period. CBO typically scores a 9pp rate increase as yielding +$180-200B after investment and incorporation response (elasticity of taxable income ~0.2-0.4 for corporate tax). Estimate: +$0.18T (Years 1-5), +$0.15T (Year 6+).

SFA base-broadening: Currently, US multinationals shift an estimated $100-150B/yr in profits to low-tax jurisdictions. SFA eliminates the incentive because tax liability follows the customer, not the headquarters. Recapture: ~$100B in additional taxable income × 28% = ~$28B. However, some firms may restructure US sales channels to reduce measured US sales. Net SFA gain: ~$0.02-0.03T.

Book Minimum expansion: Current CAMT at 15% on >$1B firms yields ~$40B. Expanding to 20% on >$100M revenue captures a much larger pool. However, most firms above $100M already pay effective rates above 20%. The incremental revenue comes from ~500-800 firms exploiting specific provisions (accelerated depreciation, R&D credits, loss carryforwards). Estimate: +$0.08T (aggressive). Conservative: +$0.05T.

Buyback excise: Current 1% yields ~$12B on ~$1.2T in annual buybacks. At 5%, with ~25% volume contraction: $0.9T × 5% = ~$0.045T. Partial shift to dividends (taxable to recipients) produces secondary income tax revenue of ~$0.01T.

Assessment:

Score corporate revenue at $0.87T (conservative) rather than any previous higher value. The difference is absorbed by the surplus without difficulty.

Scoring Endnote 6: Corporate Tax Revenue (Stress-Tested)

Scored revenue: $0.87T/yr at steady state (Year 10). Range: $0.80-0.92T.

CBO baseline: $0.77T at Year 10. Accord increment: +$0.10T (conservative) to +$0.15T.

⚠ The Book Minimum revenue is the weakest estimate in the corporate stack.

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