Sweeping Changes and an Uncertain Legacy: The Tax Cuts and Jobs Act of 2017

Abstract

The Tax Cuts and Jobs Act (TCJA) of 2017 introduced sweeping changes to individual and corporate taxation. We summarize the major provisions, trace the origins of the Act, and compare it to previous tax changes. We also examine the effects on the government budget, economic activity, and distribution of resources. Based on evidence through 2019, we find that the TCJA clearly raised federal debt and increased after-tax incomes, disproportionately increasing incomes for the most affluent. Its effects on GDP and median wages seem modest at best, although clear counterfactuals are difficult to identify. The impact on investment is less certain, and research is only recently emerging that addresses this question. Empirical analysis of longer-term effects may prove difficult due to the disruptions created by the COVID-19 pandemic starting in 2020.