Work

Tax Policy and Investment in a Global Economy

Year: 2024

Type: report

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.

Source: National Bureau of Economic Research

DOI: 10.3386/w32180

Authors: Gabriel Chodorow-Reich, Matthew Smith, Owen Zidar, Eric Zwick

Institutions: United States Department of the Treasury, National Bureau of Economic Research, Harvard University, Princeton University, University of Chicago

Language: English

Topic: Corporate Taxation and Avoidance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: green

Funders: National Science Foundation, U.S. Department of the Treasury, Harvard University, University of Chicago