Simulating corporate income tax reform proposals with a dynamic CGE model

Bhattarai, Keshab; Haughton, Jonathan; Head, Michael; Tuerck, David G

Abstract

Opinion leaders and policy makers in the United States have turned their focus to the corporate income tax, which now has the highest statutory rate in the developed world. Using a dynamic computable general equilibrium model (the “NCPA-DCGE Model”), we simulate alternative policies for reducing the U.S. corporate income tax. We find that reductions in the corporate income tax rate result in significant positive impacts on output, investment, capital formation, employment, and household well-being (for almost all deciles). All of the hypothesized reforms also result in a more-streamlined public sector. These results are plausible insofar as the DCGE model from which they are obtained is parameterized by plausible elasticity assumptions, and incorporates the adjustments in prices, output, employment and investment that result from changes in tax policy.

Citation

Bhattarai, K., Haughton, J., Head, M., & Tuerck, D. G. (2017). Simulating corporate income tax reform proposals with a dynamic CGE model. International Journal of Economics and Finance, 9(5), 20-35. https://doi.org/10.5539/ijef.v9n5p20

• Journal Article Type: Article
• Acceptance Date: Mar 15, 2017
• Online Publication Date: Apr 5, 2017
• Publication Date: Apr 5, 2017
• Deposit Date: Apr 4, 2017
• Publicly Available Date: Apr 5, 2017
• Journal: International journal of economics and finance
• Print ISSN: 1916-971X
• Publisher: Canadian Center of Science and Education (CCSE)
• Peer Reviewed: Peer Reviewed
• Volume: 9
• Issue: 5
• Pages: 20-35
• DOI: https://doi.org/10.5539/ijef.v9n5p20
• Keywords: Corporate income tax; Dynamic CGE model; US economy; Growth and redistribution
• Public URL: https://hull-repository.worktribe.com/output/450197
• Publisher URL: http://ccsenet.org/journal/index.php/ijef/article/view/67475
• Additional Information: This is a copy of an article published in International journal of economics and finance, 2017, v.9 issue 5.
• Contract Date: Apr 4, 2017