Brookings paper: 2025 tax law opens path to corporate cash-flow tax

Why the Brookings paper matters now

Brookings published a paper recently arguing that the 2025 U.S. tax law does not finish corporate-tax reform and that Congress should complete the shift to a corporate cash-flow tax. The publication adds a new voice to the long-running debate over how Washington taxes corporate profits.

The analysis carries the headline "Corporate tax reform in the wake of the 2025 tax law: Completing the shift to a corporate cash-flow tax." Brookings, a Washington-based think tank, hosts the paper on its website.

What does the headline signal?

Two assertions sit in the title. First, the 2025 statute has reset core elements of the corporate tax base. Second, the architecture for a destination-based cash-flow tax already exists in fragmentary form within U.S. code.

A destination-based cash-flow tax taxes corporate cash profits rather than accounting income and allows immediate expensing of investment. The phrase "completing the shift" frames the 2025 law as transitional rather than terminal.

Where does a cash-flow tax sit in U.S. policy history?

Destination-based cash-flow taxation has circulated in U.S. policy circles since the early 2010s. Versions have appeared under banners including the "destination-based cash-flow tax" and the "Comprehensive Business Income Tax."

The 2017 Tax Cuts and Jobs Act embedded partial expensing and a modified territorial regime, both leaning toward cash-flow mechanics. The 2025 statute sits inside that lineage, and Brookings' "completing the shift" framing implies the paper identifies unfinished elements Congress has yet to address.

The 2025 statute set a multi-year clock for Treasury and the IRS to issue implementing regulations. Treasury teams preparing 2026 filings already track proposed rules on capitalization, transfer pricing, and foreign-derived intangible income. A completed cash-flow regime would interact with the OECD's Pillar Two global minimum tax, which applies a 15% floor on multinational profits in participating jurisdictions.

What does a full shift mean for CFOs?

A cash-flow corporate regime reshapes three items finance teams track closely:

• Capital-expense timing. Full expensing removes the gap between book and tax depreciation, simplifying effective-tax-rate models tied to investment cycles and reducing deferred-tax-asset balances.
• Capital structure. Limits on net interest deductibility compress the historic tax preference for debt over equity, narrowing after-tax cost-of-capital differences across leverage levels.
• International footprint. A destination base narrows transfer-pricing exposure tied to intangibles and foreign-derived income, particularly for U.S.-headquartered multinationals with significant export activity.

Treasury functions preparing 2026 budgets can use the Brookings framing to map which parts of a cash-flow system already operate under U.S. law and which still require fresh legislation.

What should readers watch next?

Three near-term markers will indicate whether the Brookings argument gains legislative traction in 2026:

• Hearings at the Senate Finance and House Ways and Means committees on cash-flow tax architecture.
• Treasury Department technical guidance on expensing and interest deductibility rules tied to the 2025 statute.
• Inclusion of destination-based cash-flow elements in the next budget reconciliation cycle.

What does the public material contain?

The publicly visible Brookings material is a paper title tied to the 2025 tax law. Specific statutory recommendations, transitional rules, proposed rates, and 10-year revenue scores fall outside the headline-level material. Treasury leaders should pull the full paper from the Brookings site before changing any tax-planning assumptions on the strength of this announcement.