US tax cuts, little short term macro impacts

“The U.S. economy’s strong 2018 performance happened without much health from the massive tax cut President Donald Trump ushered through the previous year, according to a study released this week by CRS.

An in-depth look by the nonpartisan Congressional Research Service indicated that not only did the rollbacks in business and personal rates have little macro impact, but they also delivered the most benefits to corporations and the rich, with little boost to wages.

In all, GDP rose 2.9% for the full calendar year, the best performance since the financial crisis. But that came in an economy already poised to move higher, economists Jane Gravelle and Donald Marples wrote.

“On the whole, the growth effects [from the cuts] tend to show a relatively small (if any) first-year effect on the economy,” the report said. “Although examining the growth rates cannot indicate the effects of the tax cut on GDP, it does tend to rule out very large effects in the near term.”

 (Long Study)