THE TAX CUTS AND JOBS ACT - whitehouse.gov · THE OECD AVERAGE (EXCLUDING THE U.S.) Federal Tax...
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0% 5% 10% 15% 20% 25% In December 2017, President Donald Trump signed the Tax Cuts and Jobs Act (TCJA), which had four goals: Tax relief for middle-income families Simplification for individuals Economic growth Repatriation of overseas income The most significant Federal tax reform enacted in the United States in decades THE TAX CUTS AND JOBS ACT 40% 35% 25% 30% 15% 20% AVERAGE SALT DEDUCTIONS (2015), DOLLARS SOURCE: Centre for Business Taxation (2017). NOTE: Series combine national and subnational rates. SOURCES: Internal Revenue Service, CEA staff calculations. NOTE: Excludes those earning less than $1 in adjusted gross income. SOURCES: Office of Management and Budget Historical Table 2.3 (2017); U.S. Census Historical Statistics of the United States (1975). U.S. TOP EFFECTIVE U.S. CORPORATE TAX RATE VERSUS THE OECD AVERAGE (EXCLUDING THE U.S.) Federal Tax Revenue as a Percentage of GDP Distribution of State and Local Tax (SALT) Deductions SALT deductions are concentrated at the upper end of the income distribution; in other words, higher-income households dispropor- tionately take advantage of the deduction. Lowering individual income tax rates while simultaneously limiting use of distortionary deductions like SALT and the mortgage interest deduction can therefore facilitate tax relief to middle-income households while at the same time partially offsetting short-to medium-term negative revenue effects. The effective average tax rate, a measure of the aſter-tax profit of an investment project over its lifetime, is a crucial determinant of investment location. Since 1999, the U.S. went from being the developed economy with the fourth highest effective average corporate tax rate, to that with the highest, as other OECD countries have steadily cut corporate tax rates. reducing the top marginal Federal corporate tax rate from 35% to 21% and allowing firms to fully expense investments in nonstructure capital — would raise output by 2% to 4% over the long run, and boost average household wages by about $4,000. Using estimates from the academic literature, we calculate that two salient corporate tax reforms — ’17 ’12 2002 ’92 ’82 ’72 ’62 ’52 ’42 ’32 ’22 YEAR YEAR ’12 1902 ’92 ’82 ’72 ’62 ’52 ’42 ’32 ’22 ’12 1802 1792 '17 2015 2010 PERCENTAGE OF FILERS 2005 2000 ’ 99 Other OECD countries Individual Income Social Insurance TYPES OF TAXES Corporate Excise Miscellaneous Other Average Effective Corporate Tax Rates of OECD Countries $1,000,000+ $500,000 - $999,999 $200,000 - $499,999 $100,000 - $199,999 $0 $50,000 $100,000 $150,000 $200,000 $250,000 0% 10 20 30 40 50 60 70 80 90 100% 82% of all tax units receive, on average, a deduction of less than $1,800 February 2018
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Transcript of THE TAX CUTS AND JOBS ACT - whitehouse.gov · THE OECD AVERAGE (EXCLUDING THE U.S.) Federal Tax...
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In December 2017, President Donald Trump signed the Tax Cuts and Jobs Act (TCJA), which had four goals:
Tax relief for middle-income families
Simplification for individuals
Economic growth
Repatriation of overseas income
The most significant Federal tax reform enacted in the United States in decades
THE TAX CUTS AND JOBS ACT
40%
35%
25%
30%
15%
20%
AVERAGE SALT DEDUCTIONS (2015), DOLLARS
SOURCE: Centre for Business Taxation (2017).NOTE: Series combine national and subnational rates.
SOURCES: Internal Revenue Service, CEA staff calculations. NOTE: Excludes those earning less than $1 in adjusted gross income.
SOURCES: Office of Management and Budget Historical Table 2.3 (2017); U.S. Census Historical Statistics of the United States (1975).
U.S.
TOP EFFECTIVE U.S. CORPORATE TAX RATE VERSUSTHE OECD AVERAGE (EXCLUDING THE U.S.)
Federal Tax Revenue as a Percentage of GDP
Distribution of State and Local Tax(SALT) Deductions SALT deductions are concentrated at the upper end of the income distribution; in other words, higher-income households dispropor-tionately take advantage of the deduction. Lowering individual income tax rates while simultaneously limiting use of distortionary deductions like SALT and the mortgage interest deduction can therefore facilitate tax relief to middle-income households while at the same time partially offsetting short-to medium-term negative revenue effects.
The effective average tax rate, a measure of the after-tax profit ofan investment project over its lifetime, is a crucial determinant ofinvestment location. Since 1999, the U.S. went from being thedeveloped economy with the fourth highest effective averagecorporate tax rate, to that with the highest, as other OECDcountries have steadily cut corporate tax rates.
reducing the top marginal Federal corporate tax rate from
35% to 21%and allowing firms to fullyexpense investments innonstructure capital —
would raise output by
2% to 4%over the long run, andboost average householdwages by about
$4,000.
Using estimates from the academic literature, we calculate that two salient corporate tax reforms —
’17’122002’92’82’72’62’52’42’32’22YEAR
YEAR
’121902’92’82’72’62’52’42’32’22’1218021792
'1720152010PERCENTAGE OF FILERS
20052000’99
Other OECD countries
Individual Income
Social Insurance
TYPES OF TAXES
CorporateExcise
Miscellaneous Other
Average Effective Corporate Tax Ratesof OECD Countries
$1,000,000+
$500,000 - $999,999
$200,000 - $499,999
$100,000 - $199,999
$0
$50,000
$100,000
$150,000
$200,000
$250,000
0% 10 20 30 40 50 60 70 80 90 100%
82% of all tax units receive,on average, a deduction of
less than $1,800
February 2018
