29 November 2017
This Quantitative Note uses the OG-USA open source dynamic general equilibrium overlap- ping generations model to simulate the effect of cutting the U.S. corporate income tax rate from 35% to 20%. I simulate this rate cut under the assumptions of a closed economy and small open economy, respectively. In both cases, the corporate rate cut causes government revenues to decrease and the debt-to-GDP ratio to increase. In the small open economy scenario, GDP and wages increase by around 3.0%, and 2.5%, respectively. However, in the closed economy setting in which the increased debt service must be satisfied by domestic savings (crowding out), the GDP and wage gains are much smaller and short lived.
Richard Evans is a Senior Lecturer at the University of Chicago M.A. Program in Computational Social Science, Director of the Open Source Macroeconomics Laboratory (OSM Lab) at the University of Chicago, a Fellow with the Becker Friedman Institute at the University of Chicago, and an economist with the Open Source Policy Center (OSPC). Rick is also President of Open Research Group, Inc. (OpenRG). Rick is a core maintainer of the OG-USA open source macroeconomic model for dynamic tax analysis. His research focuses on macroeconomics, fiscal policy, and computational modeling.