- Title
- Tax Policy and Investment in a Global Economy
- Author(s)
- Gabriel Chodorow-Reich Gabriel Chodorow-Reich (Harvard University)
- Matthew Smith Matthew Smith (Office of Tax Analysis. U.S. Department of the Treasury)
- Owen Zidar Owen Zidar (Princeton University)
- Eric Zwick Eric Zwick (University of Chicago)
- 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.
- Creation Date
- 2024-03
- Section URL ID
- Paper Number
- URL
- https://www.nber.org/system/files/working_papers/w32180/w32180.pdf
- File Function
- Jel
- E22,F21,F23,H0,H25
- Keyword(s)
- Suppress
- false
- Series
- 13