Paul L. Caron

Tuesday, May 8, 2018

GOP Tax Law Could Reduce Corporate Tax Revenue By 40%

Baker InstituteRice University Baker Institute for Public Policy, Long-term Macroeconomic Effects of the 2017 Corporate Tax Cuts:

The Tax Cuts and Jobs Act of 2017 could lead to a total corporate tax revenue decline of about 40 percent, but nearly 20 percent of that decline will be recaptured through increased personal income tax revenue, according to an analysis by an expert at Rice University’s Baker Institute for Public Policy.

The results show a modest decline in wealth inequality resulting from the decline in the corporate tax rate implemented in the TCJA. Although total wealth remains highly concentrated among individuals in the top quintile, the model shows a small shift in the concentration of wealth toward each of the bottom four quintiles. Other key economic variables, including wages, household consumption, and corporate investment, experience a moderate increase, while total output remains roughly unchanged. The economic variables most directly impacted by corporate tax cuts are average dividend issuance and equity valuation, which increase more significantly. Total corporate tax revenue declines by about 40%, but nearly 20% of that decline is recaptured through increased personal income tax revenue.

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