Minimum Tax Provisions and Globalization: A Quantitative Study of TCJA

• In Event: Tax Policy and MNE Investment

Abstract

This paper examines the impact of the 2017 U.S. Tax Cuts and Jobs Act (TCJA) on offshoring and corporate globalization. Enacted during President Trump’s first term, the TCJA lowered the corporate tax rate and introduced a minimum tax on foreign income, reshaping incentives for multinational enterprises (MNEs) to shift profits and operations onshore. Drawing on tax records from U.S. MNEs uniquely capturing cross-border asset allocations and jurisdiction-level tax liabilities, this paper provides quantitative evidence that the TCJA may have supported a growth in U.S. fixed assets but not a corresponding increase in U.S. employment. Further, this paper provides evidence that the TCJA discouraged offshoring, reduced globalization, and paradoxically lowered global tax collections. These findings may serve the OECD and other global policymakers about the trade implications of minimum tax provisions.

Author

• Amparo Mercader, Georgetown University