Tax Reform Is Not a Jobs Plan

Bruce Bartlett:

Real gross domestic product growth was about the same after the 1986 act took effect in 1987 as it was before, and tax reform obviously did nothing to forestall the 1990-91 recession. Unemployment fell, but it had been trending downward before tax reform, and the 1986 act probably had nothing to do with it. Within a couple of years it was trending upward again.

By the mid-1990s, it was the consensus view of economists that the Tax Reform Act of 1986 had little, if any, impact on growth. [...] Compositional changes in income are not unimportant and may be worth the effort of doing tax reform, even if there is no growth effect whatsoever. For example, it may improve fairness, simplicity and tax administration. But it appears that even in a best-case scenario in which the top rate comes down a lot – the 1986 act lowered the top rate 22 percentage points from 50 percent – the real economic effects are at best very modest.