International Monetary Fund Revises US Growth Forecast Upwards, in Light of Trump’s Tax Cuts
A new report from the International Monetary Fund (IMF) has revised its economic growth forecast for America, in light of President Trump’s Tax Cuts and Jobs Act. The IMF expects GDP growth to be in the neighborhood of 2.7 percent in 2018—up from 2.3 percent.
The report states:
The growth forecast for the United States has been revised up given stronger than expected activity in 2017, higher projected external demand, and the expected macroeconomic impact of the tax reform, in particular the reduction in corporate tax rates and the temporary allowance for full expensing of investment. . .The tax reform is therefore anticipated to stimulate near-term activity in the United States.
The report acknowledges that most of the extra growth can be attributed to the reduction of America’s corporate tax rate to 21 percent:
The U.S. tax policy changes are expected to stimulate activity, with the short-term impact in the United States mostly driven by the investment response to the corporate income tax cuts. . .The effects of the package on output in the United States and its trading partners contribute about half of the cumulative revision to global growth over 2018-19.
This is all good news, but there is still plenty of room for improvement.
The biggest problem with America’s tax code is not the rate, but its complexity. As I’ve said before when talking about the tax code’s complexity:
The US Tax Code has nearly tripled in length from President Ronald Reagan’s substantive reforms in 1986 (which themselves were inadequate), and as of 2016 the Code proper is 2,650 pages long. This works out to a staggering 3.7 million words. To make matters worse there are a further 70,000 pages of tax forms, instructions, and regulations that taxpayers must also comply with. And on top of all that, there are innumerable court decisions that govern the way tax legislation and regulations are interpreted—ordinary people cannot easily access or understand them.
In all honesty, it is doubtful that any American alive today has read every piece of relevant tax law—including the very best New York tax attorneys. And even if someone has, there is no way that they can remember how everything fits together. The Code is just too long and too complex.
Complexity causes a number of problems. For example, it inherently favors large companies, who can hire armies of lawyers to parse the code, over small businesses that cannot. Likewise, just as a coral reef offers many places for predatory fish to hide, so too does a complex tax code help shelter corruption.
I would like to see the code be simplified next time around, but there’s no question that the current changes are better than nothing.