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 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