By Naomi Jagoda - 01/13/16 02:33 PM EST
Rep. Devin Nunes (R-Calif.) on Wednesday formally introduced a business tax reform plan that would lower the maximum tax on all businesses to 25 percent.
The bill, called the American Business Competitiveness Act, has 26 co-sponsors, according to a news release, and the endorsement of Americans for Tax Reform President Grover Norquist.
The bill would move the United States to a territorial tax system, in which companies would only be taxed by the U.S. on income earned in the country. The legislation would also revamp business taxes by moving from an income tax to a consumption tax on “cash flow.”
Under the plan, all businesses, whether they are corporations or pass-through entities, would have their net income taxed at a maximum 25 percent rate. The current top corporate tax rate is 35 percent.
Taxes would be determined each year by deducting the costs associated with a business's U.S. operations from the income generated in the country. Business investments would be completely deducted immediately, and all “loopholes” and credits would be eliminated.
“The expensing provision and the low rates will create a huge incentive for businesses to invest money to expand their operations. Meanwhile, by treating all businesses the same regardless of their size or how they’re organized, we’ll create a level playing field for startups and small businesses to compete with bigger firms,” Nunes said in the release.
“Additionally, we can expect huge sums of money parked abroad to flow back into the United States thanks to the switch to a territorial system,” he said. “These factors combined will essentially turn the United States into a giant tax haven, jolting the economy in a way we’ve never seen before.”