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The U.S. bill contains a large number of provisions that will affect the global economy, but the most important ones are the reduction in the corporate income-tax rate, the ability to expense investments in machinery and equipment (rather than amortize them), new limitations on the deduction of interest expense, and the adoption of new international tax rules that will be more similar to OECD countries.

Under the new version of the bill, the U.S. federal corporate income-tax rate will fall dramatically from 35 to 21 per cent beginning Jan. 1, 2018. Taking into account state income taxes (as shown in the accompanying table), the new U.S. corporate income-tax rate will be 26 per cent, not much higher than the world average of 24.7 per cent — and almost a point lower than Canada’s rate.

Further, the U.S. tax burden on domestic investment will dramatically decline well below many countries and slightly less than in Canada, especially in the next five years.

The lower corporate income-tax rate, and allowing expensing rather than amortization of machinery and equipment, will boost productivity as American business retool operations with digitization, artificial intelligence, robotics and big data processes. The growing U.S. economy will create more demand for imported goods and services, but the U.S. is also turning itself into a more powerful magnet for corporate investment that might have gone elsewhere.

The U.S. tax bill also contains some important limitations on the deductibility of interest expense for corporations: specifically, any interest expenses in excess of 30 per cent of adjusted profits will not be deductible. That will see multinationals moving their debt out of the U.S. and onto their books in foreign jurisdictions. Canada will bear some of this cost with falling corporate tax revenues.