Subject. The article addresses the tax reform of 2017, initiated by D. Trump. Objectives. The aim is to determine the relationship between the total volume of tax revenues to the budget of the U.S. Government and the growth of U.S. GDP in the long run. Methods. To identify the impact of the tax reform on the investment climate in the country and the subsequent GDP growth, we formulate a hypothesis and propose a regression model. The quarterly data from 04.01.1960 to 07.01.2019 serve as a statistical sampling, published by financial departments of the U.S. Office of Management and Budget and the U.S. Bureau of Economic Analysis. The study rests on the econometric analysis enabling to identify the impact of the volume of tax revenues from the corporate income tax and individual income taxes on the level of the GDP of the United States. Results. In the short term, we observe a decrease in tax revenues and a subsequent increase in the budget deficit, in the long term – an increase in business activity of the country, a growth in foreign direct investment, and, consequently, an increase in the GDP. The paper offers a model for assessing the economic growth of the GDP of the United States, in which tax predictors were used in combination with macroeconomic indicators. Conclusions. The experience of the United States and the results of this study may be used by the governments of developing countries and experts in the field of taxation for tax policy development.
Keywords: tax reform, investment, GDP, income tax, corporate tax
References:
Lyon A., McBride W. Assessing U.S. Global Tax Competitiveness after Tax Reform. National Tax Journal, 2018, vol. 71, no. 4, pp. 751–788. URL: Link
Lykova L.N. [President Trump's Tax Reform]. Mirovaya ekonomika i mezhdunarodnye otnosheniya = World Economy and International Relations, 2019, vol. 63, no. 3, pp. 38–48. (In Russ.) URL: Link
Heinemann F., Olbert M., Pfeiffer O. et al. Implications of the US Tax Reform for Transatlantic FDI. Intereconomics, 2018, no. 53, pp. 87–93. URL: Link
Hungerford T. Taxes and the Economy: An Economic Analysis of the Top Tax Rates since 1945 (Updated). Washington, DC: Congressional Research Service, 2012. URL: Link
Easterly W., Rebelo S. Fiscal policy and economic growth. An empirical investigation. Journal of Monetary Economics, 1993, vol. 32, iss. 3, pp. 417–458. URL: Link90025-B
Elmendorf D.W., Reifschneider D.L. Short–Run Effects of Fiscal Policy with Forward–Looking Financial Markets. National Tax Journal, 2002, vol. 55, no. 3, pp. 357–386. URL: Link
Jaimovich N., Rebelo S. Nonlinear Effects of Taxation on Growth. Journal of Political Economy, 2017, vol. 125, no. 1, pp. 265–291. URL: Link
Romer P. Endogenous Technological Change. Journal of Political Economy, 1990, vol. 98, no. 5, part 2, pp. 71–102. URL: Link
Lucas R.E.Jr. On the Size Distribution of Business Firms. The Bell Journal of Economics, 1978, vol. 9, no. 2, pp. 508–523. URL: Link
Gale W.G., Potter S. An Economic Evaluation of the Economic Growth and Tax Relief Reconciliation Act of 2001. National Tax Journal, 2002, vol. 55, no. 1, pp. 133–186. URL: dx.doi.org/10.17310/ntj.2002.1.08
Gale W., Samwick A. Effects of Income Tax Changes on Economic Growth. SSRN Electronic Journal, 2014. URL: Link