Edward Conard

Top Ten New York Times Bestselling Author

  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
Upside of Inequality Oxford Unintended Consequences

AI Summary. The authors estimate that the 2017 US corporate tax cut raised domestic investment at firms with the average tax change by about 20% relative to firms with no tax change, with long-run domestic and total capital up roughly 6% and 9%. They find dynamic revenue feedback under 2% of baseline corporate revenue.

Gabriel Chodorow-Reich, Matthew Smith, Owen Zidar and Eric Zwick National Bureau of Economic Research
Date Posted:
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Firms that benefited from the corporate tax cuts in the 2017 Tax Cuts and Jobs Act responded with increased investment relative to firms that were not impacted, according to @gchodorowreich @omzidar Eric Zwick and Matthew Smith.

How much did corporate tax cuts raise investment and revenue?

Core argument: The authors estimate that the 2017 Tax Cuts and Jobs Act raised domestic investment by roughly 20% for firms experiencing the mean tax change, relative to firms with no tax change.

This paper combines administrative tax data and a model of global investment behavior to evaluate the investment and firm valuation effects of the Tax Cuts and Jobs Act (TCJA) of 2017. We have five main findings. First, the TCJA caused domestic investment of firms with the mean tax change to increase by roughly 20% relative to firms experiencing no tax change. Second, the TCJA created large incentives for some U.S. multinationals to increase foreign capital, which rose substantially following the law change. Third, domestic investment also increases in response to foreign incentives, indicating complementarity between domestic and foreign capital in production. Fourth, the general equilibrium long-run effects of the TCJA on the domestic and total capital of U.S. firms are around 6% and 9%, respectively. Finally, in our model, the dynamic labor and corporate tax revenue feedback in the first 10 years is less than 2% of baseline corporate revenue, as investment growth causes both higher labor tax revenues from wage growth and offsetting corporate revenue declines from more depreciation deductions. Consequently, the fall in total corporate tax revenue from the tax cut is close to the static effect.

Takeaways by Macro Roundup® AI

  1. The authors estimate that the 2017 Tax Cuts and Jobs Act raised domestic investment by roughly 20% for firms experiencing the mean tax change, relative to firms with no tax change.
  2. The TCJA created incentives for some U.S. multinationals to expand foreign capital, which rose substantially after the law, and domestic investment also increased in response to foreign incentives, indicating complementarity between domestic and foreign capital.
  3. In the authors' model, long-run general equilibrium effects of the TCJA on domestic and total capital of U.S. firms are around 6% and 9%, while dynamic labor and corporate tax revenue feedback over the first 10 years is under 2% of baseline corporate revenue.

Related Articles:

  • Who Gains from Corporate Tax Cuts? — The authors estimate that corporate tax cuts boost overall investment and employment, with goods-producing firms such as manufacturers raising capital expenditure and wage bills without changing dividends, and a 1% cut in the marginal tax rate lifting their capital spending by as much as 8%. Service-sector firms instead direct most of the windfall to dividends.
  • End of an Era: The Coming Long-Run Slowdown in Corporate Profit Growth and Stock Returns — The authors estimate that declining interest and corporate tax rates accounted for over 40% of real corporate profit growth from 1989 to 2019, while falling risk-free rates explain the entire expansion in price-to-earnings multiples. Real earnings before interest and taxes grew slightly more slowly than in 1962–1989, at 2.2% versus 2.4% per year.
  • Is the Tax Cut Paying For Itself? By a Mile — My Wall Street Journal Op-Ed: Is the Tax Cut Paying For Itself? By a Mile.
Showing 48 database articles primarily about Taxation