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The Welfare and Distributional Consequences of Corporate Tax Cuts in Open Economies

Mamoon Kader, Hashmat Khan (), Minjoon Lee () and Raul Razo-Garcia
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Hashmat Khan: Department of Economics, Carleton Univeristy,

No 22-08, Carleton Economic Papers from Carleton University, Department of Economics

Abstract: We develop an open-economy heterogeneous household model with incomplete markets to quantitatively evaluate the welfare and distributional effects—both within and across countries—of the recent corporate tax cut (Tax Cuts and Jobs Act, TCJA) in the U.S. The model allows for examining outcomes under various possibilities including the tax cut in the U.S. being permanent versus temporary and potential ï¬ scal responses of other countries to the TCJA. We ï¬ nd that the TCJA is regressive in the U.S.and has relatively more regressive outcomes in other countries. Whether the wealth-poor in the U.S. beneï¬ t from the TCJA or not depends on the persistence of the tax cut. Finally, when a small country reduces its corporate tax in response to the TCJA, it has a progressive distributional result in its own economy. Classification-JEL, E62, F41. H25

Keywords: Tax Cuts and Jobs Act; Corporate tax cuts; Distributional effects (search for similar items in EconPapers)
Pages: 48 pages
Date: 2022-08-31
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Published: Carleton Economics Working Papers

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Handle: RePEc:car:carecp:22-08