Did the Tax Cuts and Jobs Act Create Jobs and Stimulate Growth?

The Tax Cuts and Jobs Act (TCJA) of 2017 is the most extensive overhaul of the U.S. income tax code since the Tax Reform Act of 1986. Existing estimates of TCJA’s economic impact are based on economic projections using pre-TCJA estimates of tax effects. I exploit plausibly exogenous state-level variation in tax changes from TCJA and find that an income tax cut equaling 1 percent of GDP led to a 1.3 percentage point faster job growth and nearly 1.5 percentage points higher GDP growth. The impact on growth was the strongest in the year of the tax change, with much smaller effects in the following two years. The estimates imply a tax cut multiplier of around 1.5 and a cost per job of $105,000. Moreover, they also suggest that TCJA-related income tax cuts of 0.8 percent of GDP led to 1 percentage point stronger job growth in 2018, which translates to about 1.5 million jobs at a cost of nearly $158 billion