The Council of Economic Advisers predicts U.S. gross domestic product (GDP) will increase by at least 3 percent annually through 2028.
Economic activity in the United States will increase over the next few years, the group forecasts in its annual report, because of “a nontrivial trend shift” in economic factors caused by enactment of the Tax Cuts and Jobs Act (TCJA).
The new law, signed by President Donald Trump on December 22, 2017, reduced most individuals’ tax burdens, permanently reduced business owners’ tax rates from 35 percent to 21 percent, and ceased the double taxation of American businesses’ profits earned overseas.
The report projects strong economic growth to continue through 2028, after which regulatory reform and infrastructure spending will become the primary causes of economic growth, as the effects of tax reform gradually fade.
Richard Cebula, a professor of finance at Jacksonville University, says TCJA’s reduction of taxes on business owners will continue to spark wage increases and economic prosperity.
“Investing in new plants and equipment is the ultimate way to increase productivity and real wages for workers,” Cebula said. “Economic growth has been slow because we have had almost negligible investment in these areas. One of the factors that have contributed to our abysmal performance on investment in new plants and equipment is the fact that personal and corporate taxes were way too high.”
Credits Reform Agenda
Jonathan Decker, executive director of the Committee to Unleash Prosperity, says the economic reforms enacted by Congress and Trump will lead to continued prosperity.
“President Trump has been in office for a year, and he’s started to enact his economic agenda,” Decker said. “He’s done things like repeal the Obamacare individual mandate, kept his promise to repeal two regulations for every one enacted, and passed enormous tax cuts. Now he is talking about doing a ‘phase two’ and continuing to cut taxes further.
“Confidence in President Trump’s business-friendly agenda incentivized the investment needed to create growth,” Decker said. “We will see more investment and growth throughout President Trump’s term.”
Predicts Benefits for Workers
Cebula says the tax reform will continue to raise workers’ wages.
“The personal income tax cuts will be beneficial and promote growth as people start to spend more money on goods and services,” Cebula said. “By cutting the corporate tax, in a world where we have a lot of capital mobility, we suddenly become competitive.
“A competitive tax environment will keep companies in this country, which means our economic growth has sustainability. It will also attract companies to the United States, and that will result in job increases and investment increases. When this occurs, productivity increases, and when productivity increases we not only see more jobs but we also see higher wages.”
As time goes on, more people will experience the benefits of the tax reform law, Decker says.
“It is important to note that President Trump’s economic policies, especially the tax cuts, mean a lot to the average American family,” Decker said. “Families will see more money in their take-home pay. This extra money might allow for an extra day off of work, or an additional day of vacation. It may also be used to upgrade an appliance or purchase a new car.
“The tax cuts and economic prosperity mean more jobs, higher wages, and in some cases bonuses,” Decker said.
Editor’s Note: This article was published in cooperation with The Heartland Institute’s Budget & Tax News.
Brandi Wielgopolski writes from Columbus, Ohio.