US tax cuts will boost economic growth by 0.3% points in 2018-2019

The US Congress will probably pass tax-cut legislation within the next two weeks, ushering in reductions that will boost economic growth by around 0.3 percentage points for next year and 2019, according to estimates by Goldman Sachs Group Inc.

With the Senate passing legislation on Saturday that matched the House of Representatives in including up to $10,000 in state and local property-tax deductions, that eliminated “the most important political difference between the bills before the conference negotiations start,” Goldman economists led by Jan Hatzius in New York wrote in a note.

“We expect the final structure of the bill to reflect more of the Senate bill than the House bill, including a 20 per cent corporate tax rate effective in 2019,” the Goldman analysts wrote.

While that’s down from 35 per cent today, considering the expected package more broadly, the effective corporate tax rate will come down by “only a couple of percentage points,” Goldman said.

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The median estimate of economists surveyed by Bloomberg is for the U.S. economy to expand 2.5 per cent next year and 2.1 per cent in 2019, after 2.2 per cent growth in 2017.

Bloomberg