Lessons from the Biggest Business Tax Cut in US History

Gabriel Chodorow-Reich, Owen Zidar and Eric Zwick

Journal of Economic Perspectives, 2024, vol. 38, issue 3, 61-88

Abstract: We assess the business provisions of the 2017 Tax Cuts and Jobs Act, the biggest corporate tax cut in US history. We draw five lessons. First, corporate tax revenue fell by 40 percent due to the lower rate and more generous expensing. Second, firms with larger declines in their effective tax wedge increased investment relatively more. In aggregate, we suggest a loose consensus from the literature that total tangible corporate investment increased by 11 percent. Third, the business tax provisions increased economic growth and wages by less than advertised by the Act's proponents, with long-run GDP higher by less than 1 percent and labor income by less than $1,000 per employee. Fourth, provisions that increase foreign investment by US-based multinationals also boost their domestic operations. Fifth, some of the expired and expiring provisions, such as accelerated depreciation, generate more investment per dollar of tax revenue than others.

JEL-codes: E22 E23 F23 G31 H25 J31 K34 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/jep.38.3.61 (application/pdf)
https://www.aeaweb.org/doi/10.1257/jep.38.3.61.ds (application/zip)

Related works:
Working Paper: Lessons from the Biggest Business Tax Cut in US History (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:jecper:v:38:y:2024:i:3:p:61-88

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

DOI: 10.1257/jep.38.3.61

Access Statistics for this article

Journal of Economic Perspectives is currently edited by Enrico Moretti

More articles in Journal of Economic Perspectives from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().