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The Macroeconomic Effects of Corporate Tax Reforms

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  • Francesco Furno

Abstract

Using aggregate, sectoral, and firm-level data, this paper examines the effects of two major U.S. corporate tax cuts. The Tax Cuts and Jobs Act (TCJA-17) led to large shareholder payouts but modest aggregate stimulus, while Kennedy's 1960s tax cuts stimulated output and investment with minimal payout impact. To explain this divergence, I incorporate tax depreciation policy and a pass-through business sector into a neoclassical growth model. The model suggests that accelerated depreciation and a large pass-through share dampen stimulus from corporate tax rate reductions, and that Kennedy's cuts boosted output four times more per dollar of lost revenue than the TCJA-17.

Suggested Citation

  • Francesco Furno, 2021. "The Macroeconomic Effects of Corporate Tax Reforms," Papers 2111.12799, arXiv.org, revised Feb 2026.
    • Handle: RePEc:arx:papers:2111.12799
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    References listed on IDEAS

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    Cited by:

    1. Gechert, Sebastian & Heimberger, Philipp, 2022. "Do corporate tax cuts boost economic growth?," European Economic Review, Elsevier, vol. 147(C).
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    3. Wang, Xinyi & Zhu, Ling, 2023. "How does export VAT rebates policy affect corporate investment efficiency? Evidence from corporate tax stickiness," Pacific-Basin Finance Journal, Elsevier, vol. 82(C).
    4. Marius Clemens & Werner Röger, 2021. "Rising Allowances, Rising Rates: A Tinbergen Rule for Capital Taxation," Discussion Papers of DIW Berlin 1986, DIW Berlin, German Institute for Economic Research.

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