Gap between Calif., US growth to narrow Republican tax bill would increase economic growth

The California Lutheran University Center for Economic Research and Forecasting has released its 2017 Fourth Quarter California and United States Forecast.


Highlights:

  • Given that economic theory is clear regarding the detrimental impact of higher taxes and regulation on the economy, we are continuing to forecast a narrowing of California’s growth premium over the U.S. While our forecast maintains the state’s economy will be stronger than the nation’s for the next few quarters, by 2019 the growth advantage will be negligible.
  • The current forecast of economic activity in the U.S. calls for growth to average 2.2 percent over the next eight quarters. This is an upward revision to previous forecasts, but it in no way signals a regime change whereby the U.S. economy has broken free of the pattern of anemic growth.
  • The Republican tax bill is a combination of necessary reforms and a few disappointing compromises which, on net, would increase the rate of economic growth in the United States if it passes.
  • The benefits of reducing the U.S. corporate tax rate from 35 percent to 21 percent as outlined in the conference bill will be enjoyed most by workers. While theoretical studies have produced mixed results, empirical studies of corporate taxes are clear and consistent: Corporate taxes are not borne by wealthy investors who hold company stock, millionaire CEOs and other ivory tower executives. The corporate tax is borne by labor, in the form of lower wages and other forms of compensation. 
  • We see reason for caution, not optimism, in the recent stock market gains.
  • The Federal Reserve’s interest-on-excess-reserves policy will continue to constrain economic growth until the policy is ended.


Get Citizensjournal.us Headlines free SUBSCRIPTION. Keep us publishing – DONATE

Leave a Reply

Your email address will not be published. Required fields are marked *