Oh dear!
There's a new study out showing that trumpy's 2017 TCJA did wonderful things for the US economy - and without depriving the feds of revenue!
And guess who authored it? Economists from Harvard, Princeton, U. of Chicago and the US Treasury! A collaborative effort published by the National Bureau of Economic Research (NBER):
https://conference.nber.org/conf_papers/f191672.pdf
Even Obama economists like Jason Furman endorsed its conclusions!
WSJ columnist James Freeman recently summarized it this way:
The Trump Corporate Tax Reform Worked
Incentives matter—and business investment soared.
By James Freeman
Nov. 1, 2023 1:19 pm ET
Donald Trump has a lot of faults, but even his partisan opponents and the academic establishment have to acknowledge that his signature 2017 corporate tax reform really did lead to a surge in business investment.
Economists from Harvard, Princeton, the University of Chicago and the U.S. Treasury report in a new National Bureau of Economic Research paper on “the investment and firm valuation effects of the Tax Cuts and Jobs Act (TCJA) of 2017, the largest corporate tax reduction in the history of the United States.”
The authors share a number of findings:
First, the TCJA caused
domestic investment of firms with the mean tax change to
increase by roughly 20% relative to firms experiencing no tax change. Second, the TCJA created large incentives for some U.S. multinationals to increase foreign capital, which rose substantially following the law change. Third, domestic investment also increases in response to foreign incentives, indicating complementarity between domestic and foreign capital in production. Fourth, the general equilibrium long-run effects of the TCJA on the domestic and total capital of U.S. firms are around 6% and 9%, respectively. Finally, in our model, the
dynamic labor and corporate tax revenue feedback in the first 10 years is less than 2% of baseline corporate revenue, as investment growth causes both higher labor tax revenues from wage growth and offsetting corporate revenue declines from more depreciation deductions.
The results of the Trump corporate tax reform were more business investment, more growth, more wages for workers—and little impact on government revenue as lower corporate tax rates were offset by an expanding economy. Game, set, match.
Responding to the study, William McBride and Alex Durante of the Tax Foundation elaborate on how lower corporate tax rates still generate voluminous receipts for the Treasury, even within the 10-year windows of Beltway budgeting:
Regarding the
TCJA’s impact on tax revenue, the study finds small dynamic effects within the 10-year budget window after accounting for increased economic activity. Tax revenues from labor increase due to the increased wage growth but are offset by a decline in corporate tax revenue particularly from bonus depreciation in the first few years after enactment. However, by year 10, dynamic corporate tax revenue gains begin to offset static corporate tax revenue losses while dynamic labor tax revenue reaches about 15 percent of baseline corporate tax revenue. This is sufficient to fully offset the static revenue losses from the corporate provisions by the end of the budget window.
The new study has economists buzzing on the platform formerly known as Twitter.
“These are the most convincing estimates of the response of investment to corporate tax rates that I’ve ever seen,” says Harvard’s Jason Furman, former chairman of the Council of Economic Advisers during the Obama administration. He is not among the study authors but describes the findings in a series of posts on X:
Taxes actually do matter... Companies that saw larger reductions in tax rates from the TCJA also experienced larger increases in investment in the years that followed...
Note they find that they increase investment overseas and that this investment is a complement that leads them to increased investment in the United States.
Let’s hope that Mr. Trump appreciates this last part of his success and understands how groovy it is for everybody when pro-growth U.S. tax policy encourages multinationals to increase investment around the world.
Economists will continue to debate the impact of the policy provisions for individual taxpayers in the 2017 Trump reform. But when it comes to corporate taxation, there is no longer an argument that higher rates would lead to more economic growth or increased tax collections.
https://www.wsj.com/articles/the-tru...orked-7670b723
p
