| 摘要 | With the tax reform debate raging, there are important questions about how tax reform may impact the U.S. economy. A Republican administration under President Trump is proposing a significant overhaul of the tax code, with important changes to business taxation. What impacts are these changes likely to have on U.S. GDP and wages? In this article, we describe our framework for estimating the effects of business tax policy on investment, GDP and wages.
There is little disagreement amongst economists and policymakers that the U.S. corporate income tax is out of line with the rest of the developed world. According to the Congressional Budget Office, the U.S. has the highest headline corporate tax rate in the G-20 and the fourth highest effective corporate tax rate. Moreover, U.S. multinationals are taxed under a worldwide system wherein any foreign profits repatriated to the U.S. are taxed again at a rate that nets out any foreign taxes paid, but any profits stored overseas avoid taxation. By some estimates, this has resulted in nearly $2 trillion of cash held overseas to defer taxation—money that could potentially be brought back to the U.S. for reinvestment or taxation.
The corporate income tax is our most distortionary system for raising revenue. However, concerns remain about how to reform the system. How low should the corporate tax rate be to make the U.S. competitive with the rest of the OECD? Congress and the Administration are considering a rate of 20 percent, but how will they pay for this dramatic reduction in corporate tax revenue? Can the cut in business tax rates lead to economic growth and higher wages for middle class Americans?
While there is agreement that reforming the corporate income tax would have some positive economic impacts, the magnitude is under debate. Are firms underinvesting currently because of high tax rates? How much would investment change under the plan? Answers to these questions are uncertain, largely because the U.S. has not changed the headline corporate rate in 30 years. To address these questions, we can look at the experience of other countries that have reduced their corporate tax rates; the relevant academic research suggests a potentially substantial gain from serious business tax reform.
Incorporating the findings of the academic literature on this topic, we present an attempt at modeling how business taxation may affect economy-wide business investment. Like other models, ours captures the effects of tax reform on the expansion of existing investments within the country. However, our model goes further by accounting for how statutory tax rates influence the location of multinational investment. We model how these changes in investment could potentially affect GDP and wages. Our approach largely assumes deficit neutrality, although we present alternative estimates if the tax plan’s revenue loss is not offset by spending cuts or other tax hikes.
Our model provides an open, publicly available method to translate changes in business tax policy into changes in investment, GDP and wages. We describe how the model functions, and we apply it to a simple example of a corporate tax rate cut, as well as to the House and Senate versions of the Tax Cuts and Jobs Act. We find that in the long run, cutting the corporate tax rate to 20 percent would raise GDP and wages by 1.75 percent. If they do not increase the government debt, the House tax reform’s business tax provisions would raise GDP by 2.26 percent, and the Senate’s version would raise GDP by 2.05 percent. These impacts would be substantially increased, to 3.66 and 3.65 percent for the House and Senate bills, by making the expensing provisions in the bills permanent. However, if the revenue losses in the bills are not offset by spending cuts, then the bills would increase GDP by only 1.98 and 1.74 percent.
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Download the model spreadsheets (Excel). |
