Arbeitspapier
On the macroeconomic and fiscal effects of the tax cuts and jobs act
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.
- Language
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Englisch
- Bibliographic citation
-
Series: Arbeitspapier ; No. 10/2018
- Classification
-
Wirtschaft
Fiscal Policy
Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
Studies of Particular Policy Episodes
- Subject
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tax reform
corporate taxes
capital taxes
labor income taxes
spending cuts
fiscal stimulus
- Event
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Geistige Schöpfung
- (who)
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Lieberknecht, Philipp
Wieland, Volker
- Event
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Veröffentlichung
- (who)
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Sachverständigenrat zur Begutachtung der Gesamtwirtschaftlichen Entwicklung
- (where)
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Wiesbaden
- (when)
-
2019
- Handle
- Last update
-
10.03.2025, 11:42 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Lieberknecht, Philipp
- Wieland, Volker
- Sachverständigenrat zur Begutachtung der Gesamtwirtschaftlichen Entwicklung
Time of origin
- 2019
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On the macroeconomic and fiscal effects of the Tax Cuts and Jobs Act
Fiscal stimulus and the promise of future spending cuts: A comment
Zur Qualität der Dokumentation der Schockraumversorgung schwer Traumatisierter : ein Vergleich von primär EDV-gestützter und handschriftlicher Dokumentation
The decline in euro area inflation and the choice of policy strategy
Macroeconomic model comparisons and forecast competition
Monetary Policy and Uncertainty about the Natural Unemployment Rate
Learning, endogenous indexation and disinflation in the New-Keynesian model
The new keynesian approach to dynamic general equilibrium modeling: Models, methods, and macroeconomic policy evaluation
The diversity of forecasts from macroeconomic models of the U.S. economy
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