The Tax Foundation is the nation’s leading independent tax policy research organization. Since 1937, our principled research, insightful analysis, and engaged experts have informed smarter tax policy at the federal, state, and local levels.
The Tax Foundation is the nation’s
leading independent tax policy
research organization. Since 1937,
our research, analysis, and experts
have informed smarter tax policy
at the federal, state, and global
levels. We are a 501(c)(3) nonprofit
©2021 Tax Foundation
Creative Commons CC-BY-NC 4.0
Editor, Rachel Shuster
Designer, Dan Carvajal
1325 G Street, NW, Suite 950
Washington, DC 20005
U.S. Cross-border Tax Reform
and the Cautionary Tale of GILTI
• The U.S. joined many other developed nations in adopting territorial provisions
and anti-base erosion rules as part of the 2017 tax reform.
• One major piece of that reform, that is not typical in other territorial systems,
is a new definition of currently taxable foreign earnings, Global Intangible Low
Tax Income (GILTI), which is taxed at an effective rate of 13.125 percent, with
the rate set to increase after 2025 to 16.4 percent.
• Recent research has shown that foreign earnings of U.S. companies remain
taxed at similar rates even after the 2017 reforms, implying that while the
structure of U.S. taxes on foreign earnings changed, the overall burden did
Interactions between existing law and GILTI mean that GILTI targets low-tax
earnings while unintentionally placing a higher burden on foreign earnings
that already face high levels of taxation.
• Changes embedded in the 2017 tax law and proposed by President Biden
during the 2020 campaign and by Senate Democrats would increase the tax
burden on GILTI for U.S. companies.
• Policymakers should consider ways to ensure the design of GILTI matches its
purpose as a backstop to a limited territorial tax system, rather than use it as a
template for returning the U.S. to an uncompetitive worldwide tax system.
Vice President of Global Projects
TAX FOUNDATION | 2
Today’s modern economy is made up of businesses that employ workers in countries across the