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U.S. Investment since the Tax Cuts and Jobs Act Of 2017

By: Contributor(s): Material type: TextTextPublication details: Washington, D.C. : International Monetary Fund, 2019.Description: 1 online resource (38 pages)Content type:
  • text
Media type:
  • computer
Carrier type:
  • online resource
ISBN:
  • 1498317774
  • 9781498317771
Subject(s): Genre/Form: Additional physical formats: Print version:: U.S. Investment since the Tax Cuts and Jobs Act Of 2017.DDC classification:
  • 343.73052 23
LOC classification:
  • KF6369 .K677 2019
Online resources:
Contents:
Cover; U.S. Investment Since the Tax Cuts and Jobs Act of 2017; I. HOW HAS U.S. PRIVATE INVESTMENT PERFORMED SINCE 2017?; II. HOW MUCH OF THE HIGHER INVESTMENT REFLECTS THE STRENGTH OF AGGREGATE DEMAND?; III. HOW HAS INVESTMENT PERFORMED COMPARED WITH THE HISTORICAL RELATION BETWEEN TAX CUTS AND INVESTMENT?; IV. WHAT MAY HAVE HELD BACK INVESTMENT?; A. Policy Uncertainty; B. The Role of Market Power; C. Putting Things Together; D. Other Factors; V. CONCLUSION; References
Abstract: There is no consensus on how strongly the Tax Cuts and Jobs Act (TCJA) has stimulated U.S. private fixed investment. Some argue that the business tax provisions spurred investment by cutting the cost of capital. Others see the TCJA primarily as a windfall for shareholders. We find that U.S. business investment since 2017 has grown strongly compared to pre-TCJA forecasts and that the overriding factor driving it has been the strength of expected aggregate demand. Investment has, so far, fallen short of predictions based on the postwar relation with tax cuts. Model simulations and firm-level data suggest that much of this weaker response reflects a lower sensitivity of investment to tax policy changes in the current environment of greater corporate market power. Economic policy uncertainty in 2018 played a relatively small role in dampening investment growth.
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Print version record.

Cover; U.S. Investment Since the Tax Cuts and Jobs Act of 2017; I. HOW HAS U.S. PRIVATE INVESTMENT PERFORMED SINCE 2017?; II. HOW MUCH OF THE HIGHER INVESTMENT REFLECTS THE STRENGTH OF AGGREGATE DEMAND?; III. HOW HAS INVESTMENT PERFORMED COMPARED WITH THE HISTORICAL RELATION BETWEEN TAX CUTS AND INVESTMENT?; IV. WHAT MAY HAVE HELD BACK INVESTMENT?; A. Policy Uncertainty; B. The Role of Market Power; C. Putting Things Together; D. Other Factors; V. CONCLUSION; References

There is no consensus on how strongly the Tax Cuts and Jobs Act (TCJA) has stimulated U.S. private fixed investment. Some argue that the business tax provisions spurred investment by cutting the cost of capital. Others see the TCJA primarily as a windfall for shareholders. We find that U.S. business investment since 2017 has grown strongly compared to pre-TCJA forecasts and that the overriding factor driving it has been the strength of expected aggregate demand. Investment has, so far, fallen short of predictions based on the postwar relation with tax cuts. Model simulations and firm-level data suggest that much of this weaker response reflects a lower sensitivity of investment to tax policy changes in the current environment of greater corporate market power. Economic policy uncertainty in 2018 played a relatively small role in dampening investment growth.

Master record variable field(s) change: 082

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