On the Macroeconomic and Fiscal Effects of the Tax Cuts and Jobs Act
Philipp Lieberknecht and
Volker Wieland ()
No 13629, CEPR Discussion Papers from C.E.P.R. Discussion Papers
There is substantial disagreement about the consequences of the Tax Cuts and Jobs Act (TCJA) of 2017, which constitutes the most extensive tax reform in the United States in more than 30 years. Using a large-scale two-country dynamic general equilibrium model with nominal rigidities, we find that the TCJA increases GDP by about 2% in the medium-run and by about 2.5% in the long-run. The short-run impact depends crucially on the degree and costs of variable capital utilization, with GDP effects ranging from 1 to 3%. At the same time, the TCJA does not pay for itself. In our analysis, the reform decreases tax revenues and raises the debt-to-GDP ratio by about 15 percentage points in the medium-run until 2025. We show that combining the TCJA with spending cuts can dampen the increase in government indebtedness without reducing its expansionary effect.
Keywords: fiscal policy transmission; macroconomic modeling; Tax Cuts; tax reform; TJCA (search for similar items in EconPapers)
JEL-codes: E1 E62 E63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-mac, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at firstname.lastname@example.org
Working Paper: On the macroeconomic and fiscal effects of the Tax Cuts and Jobs Act (2019)
Working Paper: On the macroeconomic and fiscal effects of the tax cuts and jobs act (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:13629
Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... rs/dp.php?dpno=13629
Access Statistics for this paper
More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().