TaxProf Blog

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

Thursday, May 17, 2018

GOP Tax Cut Not Why Economy Is Booming: Economists Are Rolling Their Eyes At Candidates’ Claims

Politico, GOP Tax Cut Not Why Economy Is Booming: Economists Are Rolling Their Eyes at Candidates’ Claims:

Republicans facing a tough midterm election season are pointing to the strong economy as proof their new tax law is working its magic.

But as campaign ads tout swelling payrolls and lawmakers spotlight companies handing out employee bonuses, there’s little evidence the tax cuts are already having an impact across the economy, which was already humming even before the law was enacted.

Unemployment, which dropped to 3.9 percent in April, has been declining for years, falling to 4.1 percent before the tax cuts were approved.

The billions in bonuses being handed out are tiny compared to the trillions of dollars in overall wages that Americans workers earn – and with the tight labor market, they might have been handed out anyway.

Meanwhile, the Treasury Department hasn’t even finished writing the new rules spelling out how exactly the new law will work. And the pace of change in business investment and labor supply is typically very slow. ...

Even conservative economists are waving off the bonuses touted by lawmakers as a poor gauge of the law's impact. "I assume those things are bonuses that [companies] would have done because of the tighter labor market that now exists anyway that they are now attributing to the tax cut for PR reasons or to curry favor with the president," said Alan Viard, an American Enterprise Institute economist.

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