An Analysis of the Tax Cuts and Jobs Act: The Estimated Effects of Corporate Tax Cuts on the United States Government and Economy

The Tax Cuts and Jobs Act (TCJA) passed in December 12th of 2017, is the most recent tax reform which encourages economic growth through domestic corporate investment and job creation. One of the most notable changes is permanently lowering the corporate tax rate from 35 percent to 21 percent. The TCJA is expected to increase GDP, employment, and income in the long run while also contributing to a decline in the Federal tax revenue in the short run. Meanwhile, the economy is expected to experience large budget deficits which will increase the interest payment on the publicly held debt as well as the debt. The TCJA will amplify the reductions in Federal tax revenue, increasing the debt. Policy makers will have to raise taxes, cut spending, or increase the debt further to pay the interest or risk a fiscal crisis. Ultimately, the Tax Cuts and Jobs Act is a long run solution to jumpstart economic growth however, it will bring to light the growing issue of the debt