Customer Logins

Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.

Customer Logins

Trump Tax plan analysis

Tax plan detail and review

On 22 December 2017, President Trump signed into law the Tax Cuts and Jobs Act (TCJA or “the Act”), the most sweeping rewrite of the nation’s tax code since the Tax Reform Act of 1986. The tax plan slashes individual and business tax rates, while broadening the corresponding tax bases. Its cost, before macroeconomic feedback, is roughly $1.5 trillion over ten years, a limit set by the Congressional Budget Resolution for fiscal year (FY) 2018.

By 2021, the implementation of the tax plan will result in real GDP rising 0.6% above our previous baseline. Over this period, the unemployment rate will temporarily decline ¼ percentage point below the baseline, bringing modest additional upward pressure on inflation. Later, as the impetus from the tax cuts dissipates, as higher deficits and debt crowd out private investments and, as the personal provisions of the Act expire, GDP quickly slips back towards the baseline level. The modest boost to potential growth implies little dynamic revenue feedback. Hence, the TCJA is likely to lead to higher deficits and debt over the next ten years, exacerbating the nation’s fiscal imbalance.

Income inequality

TCJA will shift the burden of taxation towards the lower end of the income distribution, especially after the individual provisions expire, exacerbating recent trends towards income inequality. It is also a large tax cut enacted with the economy near full employment, inflation rising towards the Federal Reserve’s 2% objective, and the Federal Open Market Committee (FOMC) already removing monetary accommodation. This raises the possibility of an unnecessary and ill-timed fiscal stimulus, the kind of “policy mistake” that has ended some previous expansions.

Labor

The impact of the tax plan on labor supply is minimal. The increase in potential GDP is attributable almost entirely to a 2% increase in capital services that itself results from an increase in nonresidential fixed investment that peaks in 2025, before starting to fade as the expensing of equipment is phased out.

GDP Growth

Through 2021, TCJA raises annual GDP growth by between 0.1 and 0.3 percentage point. The impact is larger in 2019 than in 2018 because in 2019 the catch-up in consumer spending is re-enforced by the growing impact on business fixed investment, especially from the expensing provisions that gain importance as bonus depreciation is phased out of the baseline. After 2025, when most individual provision of TCJA sunset and expensing is phasing out, growth slows below the baseline by as much as 0.4 percentage point.


Unemployment

Early on, the unemployment rate falls below the baseline by as much as 0.3 percentage point to cycle-low of 3.6%, the lowest unemployment rate since early 1969.

Initially, given modest upward pressure on the dollar, core inflation falls slightly below the baseline path. However, with the tightening of labor markets, inflation eventually moves above the baseline by about 0.1 percentage point, from 2021 through 2023, before that differential recedes.

The deficit

Federal budget deficits are larger through 2027, with the biggest impact coming in 2019 before the effects fade. Under TCJA, we project the unified budget deficit to exceed $1 trillion in fiscal year 2020, the largest deficit since 2012. However, unlike the deficit in 2012, which, with unemployment still elevated following the Great Recession, had a large cyclical component, the deficit in 2020 will come with the economy arguably beyond full employment and so be entirely structural in nature. The current account deficit also widens as nearly 40% of the extra federal deficits through 2027 are financed with savings from the rest of the world.

Experts

Nariman Behravesh, Ph.D.

Dr. Behravesh works closely with the company's chief economists on the forecasting process at IHS Markit. Dr. Behravesh and his team have received numerous awards, among them the 2017 Lawrence R. Klein Blue Chip Forecast Accuracy Award and top forecasters by Consensus Economics in 2013. Attaining consistently high annual ranking among US forecasters from The Wall Street Journal, Dr. Behravesh was ranked #3 (out of 56) for 2006, and was the only forecaster to place in the top six for 2003, 2004 and 2006. He frequently is cited by leading business publications, including The Wall Street Journal, The New York Times, The Financial Times, Forbes and US News & World Report. He appears regularly on national radio and television programs, including BBC World Business Report, NBC Nightly News, CNN Headline News, The News Hour with Jim Lehrer (PBS), Fox News, CNBC, Bloomberg TV and Radio, All Things Considered and Marketplace on National Public Radio. He is a featured speaker at many of the top global conferences each year, including IHS Markit CERAWeek and the World Economic Forum in Davos, Switzerland.Dr. Behravesh holds Ph.D. and M.A. degrees in economics from the University of Pennsylvania, where Nobel Laureate Lawrence R. Klein was his dissertation advisor, and a Bachelor of Science from the Massachusetts Institute of Technology, US.

View Profile

Chris Varvares

Mr. Varvares has nearly 40 years of experience in macroeconomic modeling, forecasting and policy analysis, as co-head of US Economics at IHS Markit, in his previous role as a principal of Macroeconomic Advisers and as a member of the staff of the President's Council of Economic Advisers (1981-1982); he served as a member of the US delegation to the OECD in April 1982. Macroeconomic Advisers was acquired by IHS Markit in 2017. He and the IHS Markit US economic principals serve as consultants to key agencies of the US and foreign governments, major trade associations, and private corporations, and are widely quoted in the business and financial media. IHS Markit is widely recognized as among the most accurate forecasters of the US economy. Mr. Varvares is a recent past president and a former director of the National Association for Business Economics (NABE). He served as president of the NABE Gateway chapter in St.Louis and is a member of the American Economic Association. He serves as a member of the New York State Economic and Revenue Advisory Board and has participated in the meetings of the Outside Consultants to the CBO, has been a panelist for the World Economic Forum, and he sits on advisory boards for the Olin Business School at Washington University and the Walker School of Business and Technology at Webster University. Mr. Varvares holds a Bachelor of Arts in Economics from The George Washington University and received his graduate training (ABD) in Economics from Washington University in St. Louis, where he was also a member of the adjunct faculty in both the economics department and the Olin School of Business.

View Profile

Patrick Newport, Ph.D.

Dr. Newport tracks the investment and construction sectors for the Global Insights Macroeconomic Service and serves on client consulting projects. He manages long-term forecasts for Global Insights and co-manages the macroeconomic model. He joined the company in 1998. Previously, he worked as a research economist for the Washington State Department of Revenue, where he later served as a senior economist for the Office of the Forecast Council of Washington State. He holds a Bachelor of Arts in Business Administration and a Master of Arts in Economics from Louisiana State University, US. Dr. Newport attained his doctorate in Philosophy from Harvard University, US. He speaks English and Spanish.

View Profile

Sara Johnson

In this role, she helps clients assess worldwide business and financial opportunities and risks. Ms. Johnson co-authors the Global Executive Summary, manages the Executive Strategy Council, and presents the economic outlook to international conferences. She previously served as North American research director and chief regional economist with Standard & Poor's DRI, and managing director of global macroeconomics with Global Insight, predecessors of IHS Markit Economics & Country Risk that is now part of IHS Markit. Ms. Johnson is a former director of the National Association for Business Economics and the NABE Foundation and was named an NABE Fellow in 2014. She is past president of The Boston Economic Club and a member of the American Economic Association. Ms. Johnson holds a Bachelor of Arts in Economics and Mathematics from Wellesley College, US, and earned her Master of Arts in Economics from Harvard University, US, with concentrations in Finance and Macroeconomic Theory.

View Profile

Ken Matheny, Ph.D.

Mr. Matheny has more than two decades of experience as a professional economist and macroeconomic forecaster, including economic analysis, econometrics, and financial modeling. He is an expert on Federal Reserve policies, macroeconomic impacts, and interactions with the banking and financial sectors. He writes frequently on macroeconomics, financial markets, and the Federal Reserve. He maintains regular contact with clients and is available for media engagements. He has appeared in The Wall Street Journal, New York Times, Bloomberg, Yahoo Finance, Marketplace, and other US and foreign media outlets. Prior to joining IHS Markit, he was a Senior Economist at Macroeconomic Advisers. He was an assistant professor at Purdue University and worked in the banking industry. He holds a Ph.D. from UCLA and a Bachelor of Arts degree from Washington University in St. Louis (Economics and German), magna cum laude.

View Profile

Kathleen Navin, CBE

She joined IHS Markit through the 2017 acquisition of Macroeconomic Advisers, where she joined June 2010. Her primary responsibilities pertain to the US Macro Insights (USMI) service and to special reports and projects that utilize the proprietary macroeconomic model, MA/US. Ms. Navin is the technical lead on the Macroprudential Scenarios Service, coordinating and contributing to the development of scenarios and supporting products. In 2015, she became a member of the National Association of Business Economics' inaugural class of Certified Business Economists. She was a research associate at the Federal Reserve Bank of Kansas City in the division of Macroeconomics and Monetary Policy. Ms. Navin graduated with a Bachelor of Science degree in Economics in 2007 from the University of Missouri, where she went on to earn a Master of Arts degree in Economics in 2008.

View Profile

Jim Diffley

Formerly chief economist of IHS Markit US Regional Services Group, he was responsible for the Regional Core Macroeconomic Service and the Global Insight Real Estate and Construction Service. Since 1998, Mr. Diffley has supervised the quarterly economic forecast of the 50 states and over 300 metropolitan areas of the United States. He regularly makes presentations of these regional economic forecasts and analysis to clients, conferences, governmental bodies and the press.Mr. Diffley is now responsible for customized consulting projects, specializing in public finance. These have included long-term projections of cigarette consumption, forecasts of capital gains realizations, analysis of the economic impact of the securities industry on New York State, analysis of the impact of changing oil prices on local economies and the economic impact of various facility locations. Mr. Diffley's academic work in the US includes a Bachelor of Arts in Mathematics & Economics from State University of New York at Buffalo, a Master of Arts in Economics and a doctorate (ABD) at the State University of New York. From 1982 to 1987, he was on the economics faculty at Adelphi University, US.

View Profile

James Kelly

His responsibilities include preparing forecasts and written economic analysis for states in the Midwest and South, including Kansas, Missouri, Arkansas, Kentucky, Tennessee and Mississippi, as well as their respective metropolitan areas. A native of northwest Arkansas, he continues to track developments and monitor trends in the region's economy. He also helps spearhead US Regional's use of data analytics and Power BI to make forecast data and visualizations more accessible for clients. Before joining IHS Markit, he received a Bachelor of Science in Economics from the University of Missouri, US, and a Master of Science in Economics from the University of Illinois at Urbana-Champaign, US.

View Profile

Ben Herzon, Ph.D.

Known as the current-quarter Guru of IHS Markit, Dr. Herzon focuses on translating recent trends in high-frequency data into a near-term forecast of GDP growth with high statistical precision. That includes directing the analysis of the data, authoring data commentaries, running the current-quarter tracking system, designing and maintaining a population-weighted snowfall database and conducting other research that requires a heavy dose of statistical horsepower. In addition, he writes portions of the forecast reports and conducts and reports research on a variety of macro topics. He joined Macroeconomic Advisers (later acquired by IHS Markit) a year prior to receiving his Ph.D. in economics from Washington University in April 1998. His research there focused tracing the effects of monetary policy shocks through various industrial sectors, employing BEA's input-output accounts and time-series econometric techniques. He is a member and previously served as president of the St. Louis Gateway Chapter of NABE.

View Profile

Joel Prakken, Ph.D.

A thought-leader on US economic outlook, monetary policy forecasts and fixed income markets with over 30 years of experience and expertise as a macroeconomic modeler, Dr. Prakken has developed an unmatched structural-econometric model of the US economy. He co-founded Macroeconomic Advisers which was acquired by IHS Markit in 2017. Prior to founding Macroeconomic Advisers, Dr. Prakken held the position of senior economist at the World Headquarters of the IBM Corporation and before that he served with the Federal Reserve Bank of New York, US. He also has held positions on the faculties of New York University's Graduate School of Business, the Economics Department of Washington University, and the Olin School of Business at Washington University. He is the past president and a fellow of the National Association for Business Economics (NABE). He is also past president of the Gateway Association of Business Economists in Saint Louis. Dr. Prakken has many publications to his credit, including papers written for the Council of Economic Advisers, the American Council for Capital Formation, and the Center for the American Study of Business on topics ranging from tax reform to budget policy to monetary policy to the impact of technology on productivity. He has testified on these topics before committees in both the US House of Representatives and the Senate. Dr. Prakken has participated in meetings of the Outside Consultants to Board of Governors of the Federal Reserve System, is a past member of the Panel of Economic Consultants to the Congressional Budget Office and is a current member of the advisory committee of the Bureau of Economic Analysis. Dr. Prakken completed his undergraduate degree in economics at Princeton University, and holds an MA and Ph.D. in economics from Washington University in Saint Louis, United States.

View Profile

Follow Economics & Country Risk on Twitter

{}

Explore

Filter Sort