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Finance and Credit
 

Tax reform initiated by D. Trump: Economic and social aspects

Vol. 27, Iss. 3, MARCH 2021

Received: 25 January 2021

Received in revised form: 8 February 2021

Accepted: 22 February 2021

Available online: 30 March 2021

Subject Heading: FISCAL SYSTEM

JEL Classification: H20, H21, H24, H25, K34

Pages: 693–720

https://doi.org/10.24891/fc.27.3.693

Elena Yu. MAKUSHINA National Research University – Higher School of Economics (NRU – HSE), Moscow, Russian Federation
emakushina@hse.ru

https://orcid.org/0000-0002-8985-4058

Dar'ya M. KARMANOVA National Research University – Higher School of Economics, (NRU – HSE) Moscow, Russian Federation
dmkarmanova@edu.hse.ru

https://orcid.org/0000-0002-6316-4788

Aleksei S. KUCHER National Research University – Higher School of Economics, (NRU – HSE) Moscow, Russian Federation
askucher@edu.hse.ru

https://orcid.org/0000-0001-9538-3857

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

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ISSN 2311-8709 (Online)
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