Is The Current Tax Policy Achieving Its Desired Effects? An Economic Analysis of U.S. Tax Policy Making

The central focus of my research project is to analyze if the current tax policy has had the effects on U.S. businesses desired by the lawmakers and the President at the time of signing the policy into law.  I plan to further this analysis by investigating the availability of resources to measure the effects of the tax system and how these reports influence the process by which tax policies are formulated, such as reports by the Congressional Budget Office.  I will analyze this through data analysis, namely through a continuation of the empirical model developed by economists Roger Gordon and Young Lee in a 2001 work that illustrated the effect of corporate income tax rates on the propensity for firms to engage in financing through debt alternatives to achieve tax write offs.  After updating this data for more recent changes in the tax code, I will study what was discussed by members of Congress and the President in debates over the bill that set the current tax policy with regards to how the bill will influence U.S. corporations’ behavior.  Then by using empirical studies such as the one above, I can evaluate if any desired effects, like economic growth, have been realized as well as if any negative, unforeseen consequences arose, such as the increase in debt financing.

 Furthermore, I plan to investigate how the “political process” has slowed or altered any relevant tax reform actions.  For instance, the current Corporate tax code has been impelling firms to engage in higher than normal debt levels for the past couple of decades.  It is important to analyze how this action has affected the U.S. economy as a whole.  If the tax code had been revised, taking this into consideration, would the recent financial recession  have been as substantial?  Using this as an example, I will analyze lawmakers’ ability to study these effects and mitigate them through future legislation.

Comments and suggestions are always welcome!  I am honored to be a fellow alongside all of you and look forward to reading your topics.

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