[1/11/17] President-elect Donald Trump’s proposals to cut taxes on corporations and personal income will boost economic growth, according to a new report from the World Bank Group.
Trump has proposed cutting the corporate tax rate from its current level of 35 percent to 15 percent, with the intention of bringing jobs back to the United States.
The World Bank Group estimates that this cut alone would boost U.S. gross domestic product growth by roughly 0.9 to 1.3 percentage points over eight quarters.
Trump has also indicated he would cut personal income taxes for all Americans, reduce the number of individual tax brackets from seven to three, and change the structure of tax deductions.
The World Bank Group estimated that these cuts would reduce the average tax rate on personal income by about 2.5 percentage points and 7 percentage points for top earners. This potentially would increase GDP growth between 0.4 to 0.6 percentage points after eight quarters of being implemented.
“Taken together, these corporate and personal income tax reforms could—without consideration of additional policy changes by the new administration—raise U.S. GDP forecasts to 2.2-2.5 percent in 2017 and 2.5-2.9 percent in 2018,” the report states.
“These estimates depend on the timing of the tax cuts, the reaction of monetary policy authorities, the amount of slack remaining in the U.S. economy, and how businesses and households adjust their expectations to these policy changes.”