The Pie: An Economics Podcast
Promises Delivered? The Economic Effects of the 2017 Tax Cuts and Jobs Act
Sep 5, 2024
Eric Zwick, a Professor of Economics and Finance at the University of Chicago's Booth School of Business, dives into the Tax Cuts and Jobs Act of 2017. He examines whether it lived up to its promises, revealing a significant drop in tax revenues despite some investment uptick. Zwick discusses the act's impact on corporate tax rates and income inequality, as well as future implications as the act nears expiration. He also shares insights on small business growth, and they even mix in some fun with a playful chat about baking pie!
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Quick takeaways
- The Tax Cuts and Jobs Act of 2017 significantly reduced tax revenues by approximately 40% over the long term, highlighting its fiscal impact.
- While the corporate tax rate was lowered to stimulate investment and boost wages, actual wage growth was far below the promised figures.
Deep dives
Impact on Tax Revenues
The Tax Cuts and Jobs Act (TCJA) significantly reduced tax revenues, falling short of proponents' claims that it would pay for itself. It is estimated that the reform lowered tax revenues by around 40% over the long term, indicating a substantial fiscal impact. Researchers forecast that while some revenue could be recouped through increased economic activity, the gains would be minor in comparison to the initial cuts. Over ten years, only about 2% of the lost revenue from the reform is likely to be recovered, highlighting the limited effectiveness of the tax cuts in generating sustainable revenue.
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