KEY POINTS:
- At the beginning of the century corporate tax rates in the G7 industrial countries were all about the same at the national level, though state corporate rates made this higher in the United States.
- Our G7 competitors began slashing their rates throughout the first decade and a half of the century so that by 2016 US corporate rates were significantly higher.
- The 2017 tax cuts brought US rates into line with other G7 countries though the inclusion of state taxes still makes the US rate higher than average.
KEY POINTS:
- At the end of 2019 US GDP was 1.4 percent or $266 billion higher than the CBO predicted it would be just prior to the 2016 election.
- Over the 10-year budget forecasting range of the bill this would produce a cumulative increase in GDP of $2.3 trillion even if growth were the same as CBO predicted.
- If growth continued at its post-tax cut pace, GDP would be $7.1 trillion higher over the 10-year forecast range than CBO predicted.
- Assuming an 18 percent tax share of GDP this higher growth would produce $1.28 trillion in higher revenues or almost 90 percent of the estimated cost of the tax cut.
KEY POINTS:
- The main source of increased growth over the last few years has been greater non-residential fixed investment.
- This is consistent with the economics literature which shows that the target capital stock is increased by a reduction in the user cost of capital; this leads to a spike in investment.
- After this spike the growth rate of investment returns to normal, but does so at a new higher level.
