Here's a flavor of Slemrod's argument:
"The Tax Cuts and Jobs Act is not tax reform, at least not in the traditional sense of broadening the tax base and using the revenue so obtained to lower the rates applied to the new base. Nor, based on its unofficial title, did it aspire to this approach as a main objective. It does, though, contain several base-broadening features long favored by tax reform advocates.
"or is the Tax Cuts and Jobs Act just confusion. There are coherent arguments buttressing the centerpiece cut in the corporation tax rate. To the extent that the new legislation reduces the cost of capital (which is not obvious), business investment will be higher than otherwise.
"Its serious downsides are the contribution to deficits and to inequality. The former is less of a concern to the extent that the Tax Cuts and Jobs Act turns out to stimulate growth; the latter is less of an issue the more its centerpiece cuts in business taxation will be shifted to the benefit of workers, especially low-income workers. In both cases, the Tax Cuts and Jobs Act represents a huge gamble on the magnitude of these effects, about which the evidence is not at all clear. My own view is that the stimulus to growth will be modest, far short of many supporters’ claims, and so the Tax Cuts and Jobs Act will increase federal deficits by nearly $2 trillion over the next decade, a nontrivial stride in the wrong direction that promises to shift the tax burden to future generations. How it will affect the within-generation distribution of welfare is the most controversial question of all. Although according to conventional wisdom, the Tax Cuts and Jobs Act delivers the bulk of the tax cuts to the richest Americans, whose relative well-being has been rising continuously in recent decades, other plausible models of the economy, supported by some new empirical evidence, raise the possibility that the gains will be more widely shared. This is the most important question about which we know too little."Auerbach digs into the tricky issues involved in thinking about who really ends up paying corporate taxes, how they affect investment, and how the answers to these questions may change in a world of multinational corporations operating across borders.
For example, until a few years ago the traditional view had been that corporate taxes reduced the return on investment. Thus, even if the corporate income tax was formally collected from companies, the Congressional Budget Office and others assumed that it was actually paid by those who receive income from capital investment. However, in an economy where corporate investment flows easily across international borders, this assumption may not hold up. A higher domestic tax on corporations could chase capital to other countries and reduce investment, which in turn would reduce productivity and wages of domestic workers over time. Auerbach reports that in "the five decades between 1966 and 2016, the share of the income of US resident corporations that was accounted for by foreign operations rose from 6.3 to 31.1 percent." Thus, since 2012, the CBO now assumes that 75% of the US corporate tax is paid by lower returns on capital income, but the other 25% is paid by lower wages for workers.
But these estimates about how corporate taxes affect domestic investment and thus ultimately productivity and wages are rough, and there is room substantial disagreement. As Auerbach writes:
"One may trace the controversy over distributional effects of the 2017 tax cut (or other potential tax corporate cuts) to differences over the effectiveness of such tax cuts at promoting capital deepening, differences over the extent to which any such capital deepening would generate increases in wages, and differences over whether a corporate tax cut might increase wages through other significant channels. ...
In summary, the rise of the multinational corporation, with cross-border ownership and operations, and the growing importance of intellectual property in production have broadened the set of relevant behavioral responses to corporate taxation and led governments to participate in a multidimensional tax competition game. In this game, each country chooses not only its statutory corporate tax rate, but also asset-specific provisions applying to domestic investment and rules applying to cross-border investments. Changes in any one instrument may affect firms on several decision margins, and policy changes might influence US investment through several direct and indirect channels. While one may expect a reduction in the US corporate tax rate to encourage US-based investment and production, the effects of other policy changes may be more complex."And of course, the effects of US corporate tax changes will also be affected by how other countries respond to changes in US corporate taxes, and by what further changes are made to tax law in the future. All that said, there does seem to be some rough commonality in the findings of a number of studies that the 2017 legislation will increase incentives for domestic US investment, and in that way lead to additional growth over a 10-year time horizon. Here's Auerbach:
"The Joint Committee on Taxation (2017b) “projects an increase in investment in the United States, both as a result of the proposals directly affecting taxation of foreign source income of US multinational corporations, and from the reduction in the after-tax cost of capital in the United States.” The average increase in the capital stock over the 10-year budget window is 0.9 percent and the average increase in GDP is 0.7 percent, although the increases are smaller at the end of the period because of the changes in provisions noted above. Congressional Budget Office (2018) projects an average increase in GDP of 0.7 percent over the 10-year budget period. A relatively similar private-sector assessment by Macroeconomic Advisers (2018) finds that potential GDP rises by 0.6 percent by the end of the budget period, “mainly by encouraging an expansion of the domestic capital stock.” The Penn Wharton Budget Model (2017) estimates a 10-year growth in GDP of between 0.6 and 1.1 percent, depending on assumptions about the composition of returns to capital. Barro and Furman (forthcoming, Table 11) estimate that GDP would be higher as a result of an increased capital-labor ratio, by 0.4 percent after 10 years under the law as written, and 1.2 percent if initial provisions were made permanent, with the effects being smaller if deficitinduced crowding out is taken into account."