Impact of Tax Reforms on United States Economic Growth

Impact of Tax Reforms on United States Economic Growth Name Institutional affiliation Table of Contents TOC \o "1-3" \h \z \u 1.0 Introduction PAGEREF _Toc7430046 \h 22.0 Effects of Tax on the Economy PAGEREF _Toc7430047 \h 22.1Tax Cut Rates PAGEREF _Toc7430048 \h 42.2 Taxation System PAGEREF _Toc7430049 \h 52.3 Financing PAGEREF _Toc7430050 \h 52.4 Government Entities PAGEREF _Toc7430051 \h 53.0 Historical Analysis: Taxes and U.S. Economy PAGEREF _Toc7430052 \h 64.0 Conclusion PAGEREF _Toc7430053 \h 7References PAGEREF _Toc7430054 \h 8 Impact of Tax Reforms on United States Economic Growth 1.0 Introduction Towards the end of 2017, the United States enacted the US tax reforms that contained elements that aimed at promoting a stronger economic growth in the country. These elements included individual tax cuts, a shift towards a territorial global taxation system with anti-base erosion measures, a globally competitive corporate tax rate, and a unlocking overseas cash with compulsory ‘deemed repatriation’ of unrepatriated proceeds. According to PwC, the 2017 legislation provided a net tax cut of $1.5 trillion over the budget period between 2018 and 2027. In recent times, a general bipartisan agreement established that the US corporate tax rate required to be decreased to a more competitive level based on other leading economies in the world. Although Democrats have harshly opposed any reduction in corporate tax rates, the chairman of the House Ways and Means Committee has always expressed support for the reduction of corporate tax rates arguing that it would be fiscally responsible. Prior to the 2017 tax act Wyden, a Senate Finance Ranking Member introduced comprehensive tax reform legislation, which would have lowered the rates of corporate income tax to 24% regardless of the current taxation of a United States firm’s global income, which is devoid of benefit of deferral. Overall, these legislations are geared towards enabling conditions for the growth of the country’s economy and that of its citizens. However, while reforms aimed at reducing the existing subsidies, improving incentives, avoiding deficit financing, and avoiding windfall gains will have positive effects on the long-term economic growth, they may also create some trade-offs between efficiency and equity. This paper discusses the impacts of income tax reforms on tax cut rates, taxation system, financing, and government entities, and relates how these changes affect economic growth and business investments within the United States and internationally.[PwC (2019). Moving beyond tax reforms. Retrieved April 29, 2019, from: /us/en/tax-services/publications/assets/2019-tax-policy-outlook-moving-beyond-tax-reform.pdf] [Gale, W.G., & Samwick, A.A. (2014). Effects of income tax changes on economic growth. Economic Studies at Brookings. Retrieved April 29, 2019, from: /wp-content/uploads/2016/06/09_Effects_Income_Tax_Changes_Economic_Growth_Gale_Samwick.pdf] 2.0 Effects of Tax on the Economy Economists and policy makers have long been interested in understanding how the potential changes to the system of personal income tax can affect the overall country’s economy. In December 2017, the United States through Congress enacted one of the most sweeping tax changes ...