Table: Lots of Options, Lots of Problems

ADOPT A EURO-STYLE TERRITORIAL SYSTEM

This would tax all income earned in U.S. but exempt overseas revenues.

Pros: Could be simpler than today's regime. A common worldwide system would reduce opportunities to shuffle income between different tax regimes.

Cons: Some versions are just as messy as the U.S. method. The French system has done little to make companies more competitive.

EXEMPT FOREIGN DIVIDENDS FROM TAX

Most foreign income would be untaxed in U.S. But deductions for business expenses would be set by a strict formula.

Pros: Because it eliminates tax credits and gaming of deductions, it could be easier to administer. Also aims to tax investments equally no matter where they are made.

Cons: Would raise U.S. taxes on multinationals--politically difficult.

TAX FOREIGN INCOME WHEN IT IS EARNED

Current system allows companies to avoid tax until foreign earnings are returned to U.S., encouraging manipulation of books and tax avoidance. New rules would tax income as it is earned.

Pros: Would end much gaming of the system and make it easier for investors to understand corporate tax liability.

Cons: Would raise taxes on U.S. companies, giving foreign rivals a big edge.

TINKER

Keep the basic system, warts and all. But lower corporate rates in the U.S. and simplify the rules.

Pros: Would make U.S. companies more competitive. Would encourage more domestic investment and reduce tax manipulation.

Cons: There is no agreement among U.S. business on how to simplify. Cost to Treasury could be prohibitive. Could end subsidies to U.S. exporters.

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