Stanford Leadership Forum 2026: Business Taxation and Society

The discussion panel on business taxation and society, co-moderated by Juan Carlos Suarez Serrato and Rebecca Lester, brought together experts from business, government, and policy to discuss the current tax landscape and future policy conversations. Panelists included George Callas of Callas Strategy Group, Gaurav Nagdev, Head of Tax at Webflow, and Elena Patel, co-director of the Urban-Brookings Tax Policy Center. Elena Patel initiated the discussion by highlighting the intertwining of the current tax moment with the federal fiscal picture. She explained that federal revenue has been structurally lower since 2001, now at about 17% of GDP compared to 19% previously, while spending has not decreased. This has resulted in a structural budget gap with persistent primary deficits, currently at 2% of GDP and projected to reach 3% within ten years. If temporary tax provisions, such as those passed last summer, are extended, this deficit could grow to 3.5%. This structural imbalance between revenue and spending significantly impacts the debt-to-GDP ratio, which is currently around 100%, a historic high outside of World War II. Projections indicate this could rise to 183% of GDP by 2054 if nothing changes, or even 233% if certain assumptions are relaxed, such as interest rate feedback from deficit financing. Patel emphasized that the $4 trillion tax bill passed last summer, which was deficit-financed, could have instead shored up Social Security for 75 years. Social Security's trust fund, financed by payroll taxes, is projected to be unable to pay 100% of eligible benefits by 2031, making it a critical upcoming tax policy issue. She characterized the last summer's tax bill as regressive, worsening the fiscal trajectory. Gaurav Nagdev offered an operational perspective from his experience at Webflow, focusing on globalization and transparency. He noted the emergence of a global coordinated system, Pillar Two, imposing a 15% minimum tax, and the increasing sharing of information and data among governments. New accounting standards, requiring disclosure of effective tax rates by jurisdiction and taxes paid, mean companies' tax profiles are now public, leading to scrutiny from countries if tax payments vary significantly. This increased transparency and data sharing is expected to continue. George Callas concurred with Patel's assessment of the fiscal situation, drawing parallels to Ray Dalio's "The Big Debt Cycle" and its prediction of 80-year debt crises. Callas warned that the U.S. is approaching an "inescapable debt spiral" where increasing debt service costs, now over a trillion dollars annually (exceeding the defense budget), necessitate more borrowing, leading to higher interest rates and further borrowing. He stressed that resolving this requires efforts on both the tax and spending sides, a matter of "pure math" rather than ideology. Callas also addressed the multilateral tax environment, specifically the OECD's efforts to establish an international minimum tax. He noted that while the U.S. has a deal with the OECD, its implementation by national governments globally remains uncertain. Additionally, Callas highlighted the growing importance of tariffs as a material component of federal revenue, a shift not seen since the McKinley administration. He pointed out that Congress's delegation of tariff power to the president in the 1960s and 70s creates instability and unpredictability in revenue, as tariffs can be changed daily by executive action. The discussion then shifted to minimum taxes as a policy goal to address the growing spending and revenue gap. Rebecca Lester mentioned California's billionaire tax, the U.S. federal corporate alternative minimum tax (CAMT) passed in 2022, and the OECD's global minimum tax. George Callas, a key architect of the 2017 Trump tax changes, stated that minimum taxes are "suboptimal" from a good tax policy perspective. He argued that if a minimum tax is needed, it indicates flaws in the regular tax system that should be fixed directly, such as plugging loopholes or adjusting rates and credits. However, due to political difficulties in making transparent changes, minimum taxes are often adopted as a more opaque solution. He cited the CAMT as an example, describing it as a "Frankenstein's monster" of political compromises, whose true impact on taxation is unclear and which paradoxically undermines other policy goals, such as green energy credits. Callas identified at least four minimum or quasi-minimum taxes in the federal Internal Revenue Code: CAMT, BEAT (Base Erosion Anti-Abuse Tax), GILTI (now NICKT), and the 80% of income limit on Net Operating Losses (NOLs). Elena Patel echoed Callas's criticism of CAMT, calling it an example of "politics having run amok with tax policy." She explained that CAMT arose from the political problem of public perception that some profitable firms, like Amazon, pay little to no tax. Patel argued that this is often by design, as the tax code includes incentives like accelerated depreciation and full expensing for capital expenditures and R&D, which can lead to zero tax positions for firms. CAMT, she argued, attempts to undo these economic policy incentives and is poorly designed, often failing to target its intended beneficiaries and instead taxing timing differences. Patel also noted the significant political hurdle of unwinding CAMT due to its initial scoring as raising $200 billion, a figure she believes is a "wild overestimate" compared to historical CAMT revenue generation. Gaurav Nagdev described the operational challenges of minimum taxes for companies. He highlighted the complexity and uncertainty due to continuously evolving guidance for CAMT and Pillar Two, making forecasting and planning difficult. Complying with these taxes also creates significant administrative burden, requiring companies to run more data and calculate tax twice for the same jurisdiction. The panel then transitioned to tax incentives for innovation, particularly in the context of intangible assets. Nagdev noted that while the mindset used to be about achieving the lowest possible tax rate, the 15% minimum tax floor now requires more mindful planning. He emphasized that tax strategies for intellectual property (IP) must be durable and sustainable, given political uncertainty and potential regime changes. Unwinding complex IP strategies as a company scales is very difficult and costly. George Callas discussed Qualified Small Business Stock (QSBS) exemptions, which incentivize investment in startups. He emphasized the policymaker's challenge in balancing the goal of encouraging innovation with the revenue cost. Callas noted that a significant portion of tax incentive costs might be "windfall," meaning businesses receive tax breaks for activities they would have undertaken anyway, rather than genuinely incentivizing new behavior. He questioned whether QSBS, which takes the capital gains rate to zero for qualifying investments, needs to be so generous, given that it's a very expensive provision (estimated $100 billion over ten years). Callas cited anecdotal evidence that some VC investors do not factor QSBS into their investment decisions, only enjoying the tax break afterward. He also mentioned Opportunity Zones as another example where the effectiveness of incentives in achieving their stated goals (e.g., revitalizing disadvantaged communities) versus merely providing windfalls to investors needs further empirical study. Elena Patel expanded on R&D tax credits, stating there is strong economic evidence that they effectively achieve their intended purpose of encouraging R&D investment, whose social benefit exceeds the private benefit. She characterized some corporate tax credits as "spending programs done through the tax code," designed to induce corporations to undertake activities beneficial to the broader economy, such as green energy investments. Patel also highlighted the international competitiveness angle, where U.S. companies compete against foreign firms benefiting from state spending and industrial policy in their home countries. She argued that while industrial policy is often viewed negatively by economists, the U.S. may need to engage in it, through tax code or direct spending, to remain competitive in a global economy where other state actors are actively supporting their industries. The discussion then turned to the impact of Artificial Intelligence (AI) on the tax landscape. Elena Patel addressed the argument that not subjecting bots to payroll tax subsidizes them. She countered that payroll taxes are earmarked for Social Security, and if bots won't draw benefits, their taxation isn't straightforward unless payroll taxes are used for general funds. Patel expressed concerns about the IRS's ability to leverage AI, given chronic underfunding and the increasing complexity of the tax code. She argued that AI is not a "panacea" and that the IRS lacks the resources to modernize and integrate AI tools while also protecting taxpayer privacy, especially with a current $600 billion tax gap. Gaurav Nagdev shared his experience with AI's operational impact. He predicted a shift towards real-time tax evaluation, citing an instance where his company received a notice from a small country within two weeks of transacting, likely due to an AI bot monitoring activity. This necessitates real-time reporting rather than after-the-fact filing. Nagdev also noted that AI is eliminating many manual, Excel-driven processes for tax professionals, allowing them to focus more on "value creation" and become "tax consultants" rather than day-to-day operators. George Callas revisited the R&D credit, noting its "incremental" design as an attempt to reduce windfall by only providing credit for spending above a three-year trailing average. Regarding AI, Callas mentioned Stanford RegLab, a grantee of Arnold Ventures, which conducts research on using AI for tax compliance. This includes identifying fraud and improper payments in programs like the Earned Income Tax Credit and analyzing complex multi-tiered partnerships to detect tax avoidance. He expressed hope that AI would become a tool to improve tax compliance and ease the process for honest taxpayers. During the Q&A, a question was raised about the contribution of tariffs to reducing the fiscal deficit and their long-term viability as a policy tool. Elena Patel provided figures, noting that CBO's estimate of $3.2 trillion in new tax revenue from tariffs (before the invalidation of IEPA tariffs) was a high watermark. With IEPA overturned, that number is reduced by 60%. Currently, TPC estimates about $1 trillion in tax revenue from various tariff policies. Patel explained that tariffs only raise revenue as long as imports continue, and high rates can eventually erode the tax base as global supply chains adjust. She also noted the conflicting goals of tariffs: revitalizing U.S. manufacturing (which requires permanence not currently present) versus raising revenue. She agreed that tariffs are likely to remain a feature of U.S. policy due to the difficulty of their removal. George Callas added that the instability of tariff policy, changeable daily by the president, freezes business planning. He emphasized that while tariffs could contribute a material amount (0.5% to 1% of GDP) to closing the 3% fiscal gap, their unpredictability makes them a problematic revenue source. He stressed the need for Congress to act to provide certainty. Another question addressed the role of lobbying in shaping the tax code. Elena Patel acknowledged that "people and corporations with money lobby Congress," but argued that many corporate tax changes, especially those from 2017 (like expensing and OB3), align with good corporate tax policy from an economic perspective, incentivizing investment effectively. She suggested that more "gaming" occurs on the pass-through and individual side of the tax code. George Callas agreed with the sentiment of "don't blame the taxpayer, blame the law," noting that public corporations have a fiduciary responsibility to maximize profits for shareholders. He acknowledged the existence of "rent-seeking lobbying" but also highlighted the crucial role of lobbying in providing invaluable information to policymakers. He explained that congressional staff, often in an "ivory tower," can inadvertently create laws that disrupt business models without understanding the practical implications. Lobbyists, by explaining business models and the impact of proposed changes, help ensure better-informed decisions. He gave the example of the Section 199 domestic manufacturing deduction, which was structured as a deduction rather than a lower rate due to corporate lobbying, to avoid triggering debt covenants for companies.