The Tax Cuts and Jobs Act, which is anticipated to be signed into regulation at this time, would reform the tax code by reducing federal marginal charges for many households, firms, and small companies.

We have revised our earlier estimates of the House and Senate variations of the invoice to mirror modifications made by the convention committee. The last model of the Tax Cuts and Jobs Act reduces the company tax fee from 35 % to 21 %, briefly reduces tax charges on many noncorporate (pass-through) companies, and briefly will increase the current discounted worth of capital value restoration allowances for gear.

We venture that the ultimate invoice will enhance the extent of gross home product in the long term by 2.2 %. To put that quantity in perspective, the rise in GDP interprets into a rise of just below $3,000 per family. Though we solely estimate the change in GDP over the long term, many of the enhance in GDP would seemingly happen throughout the 10-year finances window.

For reference, we beforehand estimated that the House invoice would enhance GDP by 2.6 % and that the Senate invoice would enhance GDP by 2.8 %. The up to date estimate displays modifications within the convention invoice.

The main variations between this estimate and the earlier estimates are the failure of the convention invoice to enhance capital value restoration allowances for constructions and that the modifications to particular person earnings tax charges (together with charges for pass-through companies) expire after the 10-year finances window closes.

The last invoice solely briefly modifications the foundations for expensing of recent funding and the earnings tax charges for households. We calculated the consequences of the invoice each with and with out the expiring provisions.

The headline estimate is the straightforward common of the 2, which displays enterprise’ and households’ expectations that Congress could or could not permit the short-term provisions to run out. If the expiring provisions have been made everlasting, then the extent of GDP would enhance by 2.75 %, whereas if the identical provisions have been to run out, the extent of GDP would solely enhance 1.7 %.

The modifications in GDP happen due to will increase within the capital inventory and the variety of hours labored. We estimate that the ultimate invoice would enhance the capital inventory associated to gear by 4.5 %, and the capital inventory associated to constructions by 9.4 %. We additionally estimate that the variety of hours labored would enhance by 0.5 %.


House Bill Senate Bill Conference Report (As Reported)
Capital Stock (Equipment) +4.5% +4.6% +4.5%
Capital Stock (Structures) +9.4% +10.9% +9.4%
Labor +0.7% +0.7% +0.3%
Economic Output (GDP) +2.6% +2.8% +2.2%
Annual GDP per family

(2017 dollars)

$4,068 $4,403 $2,962



Our estimates on this report mirror a company tax fee of 21 %, a mean marginal noncorporate tax fee of 22 %, a rise in after-tax wages of 3.5 %, and no change within the expensing guidelines for constructions relative to present regulation. The remainder of the estimate is detailed in our earlier report on the House and Senate payments.

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