Willem Buiter, Anne Sibert, 30 May 2018

In December 2017 the US federal corporate tax rate on profits over $10 million was reduced from 35% to 21%. This column examines the plausibility of the Council of Economic Advisers’ estimates of how a cut in the corporate profit tax rate would boost average household income, and argues that three other features of the corporate tax regime and the wider economy are central to determining the effects of such a cut: the deductibility of capital expenditure and of interest payments from the corporate profit tax base and the impact of the corporate tax cut on private and public consumption demand.

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