[[{“value”:”That is the topic of my latest Bloomberg column. Here is one summary excerpt: One result: Total tangible corporate investment went up by about 11%. That has been a welcome shot in the arm for an economy that was by some measures suffering from an investment drought. The strong state of the Biden economy may, in
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That is the topic of my latest Bloomberg column. Here is one summary excerpt:
One result: Total tangible corporate investment went up by about 11%. That has been a welcome shot in the arm for an economy that was by some measures suffering from an investment drought. The strong state of the Biden economy may, in part, be due to the Trump tax cuts.
The second effect of the tax cuts is more dramatic yet. The federal government’s corporate tax revenue fell by about 40%, because of both the lower tax rates and more generous expensing provisions. That decline is from a baseline of corporate tax revenue of 2.9% of GDP in 2017.
What it all means is that US corporations got to keep more of their money, and the US government got less. Suffice to say that there is a wide range of opinions about this trade-off. No study of the tax cut itself can resolve those disagreements. Nonetheless, it is central to any assessment of the policy.
The fiscal position of the government is weaker today than it was in 2017, so opinions on that resource reallocation to the private sector might have changed. On the more positive side, there has been a long-run increase in GDP of 0.9% — a substantial sum in an economy of more than $27 trillion. When it comes to wages, however, the tax cuts have been a disappointment, as labor income rose by less than $1,000 per employee, far less than had been predicted by the bill’s proponents.
Here is the underlying research by Gabriel Chodoros-Reich, Owen M. Zidar, and Eric Zwick. Note also this:
…the accelerated depreciation provisions generated more investment per dollar of tax revenue than any other incentives in the bill. In contrast, the tax cuts to pass-through firms underperformed.
Trump has been talking about cutting the corporate rate to fifteen percent, a plan which I think not so many economists would support.
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Economics, Uncategorized
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