This paper assesses the landmark Tax Cuts and Jobs Act (TCJA), from the perspective of both the U.S. itself and the wider world. The reform has many positive aspects including steps to broaden the base of, and reduce marginal rates under, the personal income tax (PIT), reduce distortions to investment and financing decisions, and mitigate outward profit shifting. But the TCJA has a large fiscal price tag and leaves significant uncertainty as to how the U.S. tax system will develop. The PIT changes could have better targeted relief at low earners, and there is scope to more fully address distortions in business taxation. The novel international provisions create a complex array of both positive and negative international spillovers, and have the potential to significantly reshape the wider international tax system.

This paper assesses the landmark Tax Cuts and Jobs Act (TCJA), from the perspective of both the U.S. itself and the wider world. The reform has many positive aspects including steps to broaden the base of, and reduce marginal rates under, the personal income tax (PIT), reduce distortions to investment and financing decisions, and mitigate outward profit shifting. But the TCJA has a large fiscal price tag and leaves significant uncertainty as to how the U.S. tax system will develop. The PIT changes could have better targeted relief at low earners, and there is scope to more fully address distortions in business taxation. The novel international provisions create a complex array of both positive and negative international spillovers, and have the potential to significantly reshape the wider international tax system.

There is no consensus on how strongly the Tax Cuts and Jobs Act (TCJA) has stimulated U.S. private fixed investment. Some argue that the business tax provisions spurred investment by cutting the cost of capital. Others see the TCJA primarily as a windfall for shareholders. We find that U.S. business investment since 2017 has grown strongly compared to pre-TCJA forecasts and that the overriding factor driving it has been the strength of expected aggregate demand. Investment has, so far, fallen short of predictions based on the postwar relation with tax cuts. Model simulations and firm-level data suggest that much of this weaker response reflects a lower sensitivity of investment to tax policy changes in the current environment of greater corporate market power. Economic policy uncertainty in 2018 played a relatively small role in dampening investment growth.

This dissertation includes three essays investigating the effect of taxation and tax policies on income inequality, housing values, and excess burden from homeownership, separately. Chapter 2 estimates the degree to which subnational governments can redistribute post-tax income. State and local governments attempt to reduce income inequality via progressive taxation. However, interstate mobility could undermine such attempts through gross-wage adjustments. The higher the degree of wage capitalization, the lower the ability of income redistribution. Chapter 3 uses proprietary data from the Dallas Central Appraisal District (DCAD) to estimate the degree of property-tax capitalization. Local governments search for ways to increase the amount of revenue raised from different sources. One of their primary sources of tax revenue is taxes levied on residential properties. The question Chapter 3 attempts to answer is whether it is homeowners or homebuyers who ultimately pay property taxes. The greater the degree of capitalization, the greater the share of tax borne by homeowners. Chapter 4 evaluates the effect of the Tax Cuts and Jobs Act (TCJA) of 2017 on excess burden from owner-occupied housing. Under US tax law, homeowners can reduce their housing user costs by deducting the mortgage interest and state and local property taxes from their federal taxable income. This, however, imposes an excess burden on society by distorting the housing market’s equilibrium.