Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/195092
Authors: 
Lieberknecht, Philipp
Wieland, Volker
Year of Publication: 
2019
Series/Report no.: 
Arbeitspapier 10/2018
Abstract: 
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.
Subjects: 
tax reform
corporate taxes
capital taxes
labor income taxes
spending cuts
fiscal stimulus
JEL: 
E62
E63
E65
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.