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1 1 (May 2018)

handle is hein.amenin/aeiabcg0001 and id is 1 raw text is: By Jason DeBacker and Roy Kasher May 2018 An important objective of Public Law 115 -97, (ommonly called the Tax Cuts and Jobs Act, was a reduction in the tax burden on investment, We compute marginal effective tax rates under 2017 law and under the Tax Cuts and Jobs Act and find significantly lower marginal effective tax rates under the new law, In addition, the Tax Cuts and Jobs Act narrows disparities in the tax treatment of investment across asset types, organizational form, and type of financing Finally, we find that the act sharply reduced effective average tax rates as well as marginal effective tax rates, Given its large consequences on the US economy, Public Law 115-97, known as the Tax Cuts and Jobs Act (TCJA). was passed with relatively little discussion of its effects, indeed, the hasty legislative process resulted in drafting mistakes in the bill's language. The bill's various provisions will have disparate effects on the tax system. For example, the increased standard deduction is a push toward simplification and will likely reduce compliance costs, but the deduction for qualified business income from pass-through businesses will lead to more complexity and higher comlpliance costs.:, Despite this, the Tax Cuts and Jobs Act is coherent in at least one important respect, From the pass-through business provisions to the lower corporate income tax rate, the TCJA makes signif- icant changes to tax law to stimulate investment activity.' in this article., we use B-Tax, an open-source model, to measure the changes in investment incentives brought about by the TCJA. We find sharp decreases in marginal effective tax rates (METRs) on new investment and in effective average tax rates (EATRs), In addition, the TCJA narrows disparities in the tax treatment of See Kainin et al (2017) for an overview of the potent:ai margins through which the eogs!tion nay be abused and DeBacker et ai, (2018 for an example of the effects ef a similai policy in Kansas. 2 A notab ex:eption - e changes related to cot: accounting rui; f:or resnearch and e'e rimena on (R&EL) expens-e;. The TCJA Feneraliy siows down the cost iecovery associated with R&E, eliminating rules that ailow for immediate expensing of such costs after 2021, Another excction arises from new restrictions on deductions of net o.eratin losses, which raise the effective tax rate on risky investments. :>Mc.xm< 'Km c.\ :.~ ~ Effective Tax Rates on Business Investment Under the Tax Cuts and Jobs Act

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