The Republican tax cuts have been cited as an important factor in the jump in economic growth in 2018, but a new analysis by Bloomberg Economics suggests they played a much smaller role than their supporters say they did.
Here are some highlights of the analysis by Bloomberg’s Tim Mahedy:
- “The Tax Cuts and Jobs Act of 2017 was as close as the real world gets to a laboratory experiment on whether supply-side theory works in practice. More than one year on, we have an answer. It’s ‘meh.’”
- The analysis finds that, while investment spending rose in 2018, the tax cuts didn’t play much of a role: “[W]ithout the corporate side of the TCJA, growth last year would have been 3 percent instead of 3.1 percent. That’s a much smaller boost than what White House officials had promised.”
- On the other hand, the tax cuts definitely did play a large role in raising the federal deficit, as corporate tax receipts dropped almost 31 percent for the calendar year. “While the TCJA hasn’t quite lived up to the supply-side sales pitch from a growth perspective,” Mahedy says, “its effects on government finances have been broadly in line with what its detractors anticipated.”