Tax Policy and Investment in a Global Economy

We evaluate the 2017 Tax Cuts and Jobs Act.Combining reduced-form estimates from tax data with a global investment model, we estimate responses, identify parameters, and conduct counterfactuals.Domestic investment of firms with the mean tax change increases 20% versus a no-change baseline.Due to novel foreign incentives, foreign capital of U.S. multinationals rises substantially.These incentives also boost domestic investment, indicating complementarity between domestic and foreign capital.In the model, the long-run effect on domestic capital in general equilibrium is 7% and the tax revenue feedback from growth offsets only 2p.p. of the direct cost of 41% of pre-TCJA corporate revenue.