The Macroeconomic Effects of Corporate Tax Reforms

Francesco Furno

Papers from arXiv.org

Abstract: Using aggregate, sectoral, and firm-level data, this paper examines the effects of two major U.S. corporate tax cuts. The Tax Cuts and Jobs Act (TCJA-17) led to large shareholder payouts but modest aggregate stimulus, while Kennedy's 1960s tax cuts stimulated output and investment with minimal payout impact. To explain this divergence, I incorporate tax depreciation policy and a pass-through business sector into a neoclassical growth model. The model suggests that accelerated depreciation and a large pass-through share dampen stimulus from corporate tax rate reductions, and that Kennedy's cuts boosted output four times more per dollar of lost revenue than the TCJA-17.

Date: 2021-11, Revised 2026-02
New Economics Papers: this item is included in nep-cwa, nep-dge, nep-mac, nep-pbe and nep-pub
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Citations: View citations in EconPapers (5)

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