Macroeconomic Effects of Tax Reform in the United States

Owen Evans and Lloyd Kenward
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Owen Evans: International Monetary Fund
Lloyd Kenward: International Monetary Fund

IMF Staff Papers, 1988, vol. 35, issue 1, 141-165

Abstract: The provisions of the U. S. Tax Reform Act of 1986 (TRA) have potential effects on labor supply, household consumption and saving, and business fixed investment. The literature on the possible effects of tax reform is surveyed, and a model of U. S. business fixed investment is developed and estimated. The major explanatory influences are real gross national product and the cost of capital, with the latter related to interest rates, inflation, and tax variables. The model is used to provide estimates of the possible effects on business fixed investment of the taxation changes introduced with the TRA.

Date: 1988
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