The latest wisdom on corporate income tax cuts

A corporate income tax cut leads to a sustained increase in GDP and productivity, with peak effects between five and eight years. R&D spending and capital investment display hump-shaped responses while hours worked and employment are much less affected.

That is from a new NBER working paper by James Cloyne, Joseba Martinez, Haroon Mumtaz, and Paolo Surico.  You will hear many economists, including Paul Krugman, tell you that the Trump corporate tax cuts were a failure.  It would be more accurate to say that we still do not know how effective they will be, noting that the pandemic may have extended the “five and eight years” benchmark a bit.  And it would be more accurate to report that the best available science indicates the tax cuts stand a good chance of succeeding.  See this earlier research, in top-tiered outlets, and also this.

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