TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Saturday, February 3, 2018

NY Times: The Economic Impact Of The Trump Tax Cuts

New York Times:  Trump Tax Cuts and the Economy: Time Will Tell, Maybe, by James B. Stewart:

Most presidents will at some point benefit from a surging economy and stock market, but none has claimed more credit for them than Donald J. Trump, as he did again during this week’s State of the Union address. Among the highlights:

  • “$8 trillion and more” in stock market gains.
  • “2.4 million new jobs” created since his election.
  • “Over 3 million workers have gotten tax-cut bonuses” and “rising wages.”
  • All thanks to “the biggest tax cuts and reforms in American history.”

Since the president has frequently complained that the media denies him credit for any of this, I thought it only fair to assess the degree to which the undeniably strong economy, low unemployment and surging stock market are because of Mr. Trump’s achievements, notably his sweeping tax bill.

It turns out that’s no easy task, especially since Mr. Trump has only been president for a year, and the tax legislation is little more than a month old. Economists are still debating the impact on the economy of Ronald Reagan’s 1986 tax reform legislation more than 30 years after its passage.

“It’s not like chemistry or physics where you can do a controlled experiment and change one variable,” said Joel Slemrod, professor of economics and public policy at the University of Michigan, and co-author of a seminal study of the economic impact of the 1986 tax reform act [The Economic Effects of the Tax Reform Act of 1986; see also CBO, Economic Impacts of the Tax Reform Act of 1986: Short-Run and Long-Run Perspectives]. “We can never be entirely sure because we don’t know what would have happened without the tax act.”

Even so, “there are specific things that are hard to imagine being attributed to anything else” other than the tax legislation, said Alan Auerbach, professor of economics and law at the University of California, Berkeley, and Professor Slemrod’s co-author on the study of the 1986 reform.

With that in mind, here’s a look at the major areas where Mr. Trump claims credit. ...

The bottom line: Presidents tend to get credit (or blame) for whatever economies they preside over, but it’s far too soon to evaluate Mr. Trump’s long-term impact. Even after years have passed, Professor Slemrod said, “We’ll never know with 100 percent certainty.”

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