Did Tax Cuts and Jobs Act Create Jobs and Stimulate Growth? Early Evidence Using State-Level Variation in Tax Changes

Kumar, Anil

doi:10.24149/wp2001

Working Paper

Did Tax Cuts and Jobs Act Create Jobs and Stimulate Growth? Early Evidence Using State-Level Variation in Tax Changes

Abstract: The Tax Cuts and Jobs Act (TCJA) of 2017 is the most extensive overhaul of the U.S. income tax code since the Tax Reform Act of 1986. Existing estimates of TCJA’s economic impact are based on economic projections using pre-TCJA estimates of tax effects. Following recent pioneering work of Zidar (2019), I exploit plausibly exogenous state-level variation in tax changes and find that an income tax cut equaling 1 percent of GDP led to a 1 percentage point higher nominal GDP growth and about 0.3 percentage point faster job growth in 2018.

Keywords: Taxes and Economic Growth; Tax Cuts and Jobs Act;

JEL Classification: E62; H30;

https://doi.org/10.24149/wp2001