The Tax Cuts and Jobs Act: Searching for Supply-Side Effects

The Tax Cuts and Jobs Act of 2017 (TCJA) instituted the most substantial changes in taxation in decades and was designed to boost the economy via supply-side incentives. This paper reviews these changes and examines the impacts on economic aggregates through 2019. The act clearly reduced revenue. The effect on gross domestic product is difficult to tease out of the data. Investment growth rose after the TCJA was enacted, but it was driven by trends in aggregate demand, oil prices, and intellectual capital that were unrelated to the TCJA’s supply-side incentives. Growth in business formation, employment, and median wages slowed after the TCJA was enacted. International profit shifting fell only slightly, and the boost in repatriated profits primarily led to increased share repurchases rather than new investment.