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Tax Policy and Investment in a Global Economy

Gabriel Chodorow-Reich, Matthew Smith, Owen Zidar and Eric Zwick
Additional contact information
Gabriel Chodorow-Reich: Harvard and NBER
Matthew Smith: US Treasury Department
Owen Zidar: Princeton and NBER
Eric Zwick: Chicago Booth and NBER

Working Papers from Princeton University, Department of Economics, Center for Economic Policy Studies.

Abstract: We evaluate the 2017 Tax Cuts and Jobs Act. Combining reduced-form estimates from tax data with a global investment model, we estimate responses, identify parameters, and conduct counterfactuals. Domestic investment of firms with the mean tax change increases 20% versus a no-change baseline. Due to novel foreign incentives, foreign capital of U.S. multinationals rises substantially. These incentives also boost domestic investment, indicating complementarity between domestic and foreign capital. In the model, the long-run effect on domestic capital in general equilibrium is 7% and the tax revenue feedback from growth offsets only 2p.p. of the direct cost of 41% of pre-TCJA corporate revenue.

JEL-codes: E23 F21 F23 H00 H25 (search for similar items in EconPapers)
Date: 2024-05
New Economics Papers: this item is included in nep-int, nep-opm and nep-pbe
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:pri:cepsud:328

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