The U.S. Corporate Tax Reform and Its Macroeconomic Outcomes (original) (raw)

The Economic Effects of a Corporate Tax Reform

2008

This thesis points out the inefficiencies associated with the corporate income tax system in the United States. After reviewing alternatives, I suggest adapting a consumed-income tax to form a new 'progressive consumed-income tax' to take us into the 21 st century. Using current data from international tax system changes, international tax rate comparisons, economic theory, and economists' views I will provide evidence to support my argument that the progressive consumed-income tax is the best possible plan for economic growth in America. With the implementation of a consumption-based tax, the corporate income tax is completely eliminated. I will demonstrate the economic effects of this change as well as provide a model for a progressive consumed-income tax system. The simplicity, efficiency, administrative ease, and economic incentives provided by a consumption-based tax are overwhelmingly positive. This economic analysis will prove that the move to the progressive consumed-income tax is the best option when looking at tax reform.

The Macroeconomic Effects of the Tax Cuts and Jobs Act

Working paper (Federal Reserve Bank of Cleveland)

This paper studies the macroeconomic effects of seven key TCJA provisions, including the tax cuts for individuals and businesses, the bonus depreciation of equipment, the amortization of R&D expenses, and the limits on interest deductibility. I use a dynamic general equilibrium model with interest deductibility and accelerated depreciation. I find that, initially, the tax reform had a small positive impact on output and investment. In the medium term, however, the effect on output will diminish, and the effect on investment will turn negative. The tax reform will depress investment in R&D. Government debt will surge.

The Dynamic Effects of Personal and Corporate Income Tax Changes in the United States

American Economic Review, 2013

This paper estimates the dynamic effects of changes in taxes in the United States. We distinguish between changes in personal and corporate income taxes and develop a new narrative account of federal tax liability changes in these two tax components. We develop an estimator which uses narratively identified tax changes as proxies for structural tax shocks and apply it to quarterly post-WWII data. We find that short run output effects of tax shocks are large and that it is important to distinguish between different types of taxes when considering their impact on the labor market and on expenditure components. (JEL E23, E62, H24, H25, H31, H32)

Effects of Tax Reform on Labor Supply, Investment, and Saving

Journal of Economic Perspectives, 1992

The U.S. tax system received two major overhauls during the 1980s: the tax cuts of 1981 and the Tax Reform Act of 1986. Supporters of both reforms argued that major changes in tax policy could boost saving, investment, labor supply, and entrepreneurship. Eventually, it was argued, such changes could reverse the slowdown in economic growth that began in the early 1970s and spur improvements in American living standards. The aim of this paper is to assess whether the goals of increased labor supply and capital formation were achieved.

The Impact of Corporate Income Tax on Wages and Employment

Academic Journal of Economic Studies, 2017

This paper is focused on impact of corporate tax on wages and the number of employees. Since the main goal of businesses is profit and because wages are part of the costs it’s important to understand if businesses try to cut costs by reducing wages or through reducing the number of employees. In this paper, through the analysis is intend to understand whether there is a relation between changes in corporate tax rates, the growth rate of state revenues from corporate tax with the growth rate of wages. To achieve the purpose of this paper it will also be analyzed the relation between growth rates of corporate tax with the growth rate of employment. To reach the conclusion is analyzed the progress of wages, the progress rates of corporate tax and is presented a brief overview of the economy in general because the rate of its growth will affect businesses operating there and will affect all public because a part of them is employed in the private sector. By data analysis in this paper d...

U.S. Corporate Income Tax Reform and its Spillovers

IMF Working Papers

This paper examines the main distortions of the U.S. corporate income tax (CIT), focusing on its international aspects, and proposes a set of reforms to alleviate them. A bold reform to replace the CIT with a corporate-level rent tax could induce efficiency-enhancing reform of the international tax system. Since fundamental reform is politically difficult, this paper also proposes an incremental reform that would reduce tax expenditures, reduce the CIT rate to 25-28 percent, and impose a minimum rent tax on foreign earnings. Finally, this paper analyzes empirically the likely impact of the incremental on corporate revenues outside the U.S.: Though a U.S. rate cut would likely lower revenues elsewhere, implementation of a strong minimum tax could more than offset that effect for most countries with effective tax rates above 15 percent.

Tax Reform and Investment: How Big an Impact?

Review

2We ignore the possible existence of a direct relationship from U.S. money growth to foreign inflation. For theoretical arguments on the existence of such an effect, see Aukrust (1977) and Bordo and Choudhri (1982).

The Effect of the 2017 Tax Reform on Investment

Economic Commentary (Federal Reserve Bank of Cleveland), 2020

The 2017 tax reform affected investment through many channels. I use a macroeconomic model to estimate the overall effect. That estimate suggests that, because the different provisions worked in different directions, the initial impact of the tax reform on investment was small. The same model predicts that the tax reform will hold investment down in the medium term.

Empirical Evidence on the Aggregate Effects of Anticipated and Unanticipated US Tax Policy Shocks

American Economic Journal: Economic Policy, 2012

We provide evidence on the dynamic effects of tax liability changes in the United States. We distinguish between surprise and anticipated tax changes. Preannounced but not yet implemented tax cuts give rise to contractions in output, investment, and hours worked while real wages increase. There are no significant anticipation effects on aggregate consumption. Implemented tax cuts, regardless of their timing, have expansionary effects, on output, consumption, investment, hours worked, and real wages. Results are shown to be robust. Tax shocks are important impulses to the US business cycle and anticipation effects have been important during several business cycle episodes. (JEL E23, E32, E62, H20, H30)