The Macroeconomic Effects of Corporate Tax Reforms

42 Pages Posted: 11 Feb 2022

See all articles by Francesco Furno

Francesco Furno

New York University (NYU) - Department of Economics

Date Written: February 1, 2022


This paper extends a standard general equilibrium framework with a corporate tax code featuring two key elements: tax depreciation policy and the distinction between c-corporations and pass-through businesses. In the model, the stimulative effect of a tax rate cut on c-corporations is smaller when tax depreciation policy is accelerated, and is further diluted in the aggregate by the presence of pass-through entities. Because of a highly accelerated tax depreciation policy and a large share of pass-through activity in 2017, the theory predicts small stimulus, large payouts to shareholders, and a dramatic loss of corporate tax revenues following the Tax Cuts and Jobs Act (TCJA-17). At the same time, because of less accelerated tax depreciation and a lower pass-through share in the early 1960s, the theory predicts sizable stimulus in response to the Kennedy’s corporate tax cuts. The model-implied corporate tax multiplier for Kennedy’s tax cuts is four times higher than for the TCJA-17. These predictions are consistent with novel micro- and macro-level evidence from professional forecasters and publicly available tax returns. The paper also offers analytic insights that clarify how these results relate to the capital taxation literature in macroeconomics.

Keywords: Corporate Tax, Macroeconomics, Tax Depreciation, Pass-Through Businesses

JEL Classification: E06, H02, H06

Suggested Citation

Furno, Francesco, The Macroeconomic Effects of Corporate Tax Reforms (February 1, 2022). Available at SSRN: or

Francesco Furno (Contact Author)

New York University (NYU) - Department of Economics ( email )

19 West 4th Street
New York, NY 10012
United States

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