Will tax reform drive economic growth?

Evaluating change through a long-term lens

Tax reform was intended to spur economic growth and ensure that U.S. business remains competitive. However, debt-financed tax cuts, spending increases and a complex tax code have fueled uncertainty. While trying to maximize the benefits and minimize the impacts, companies will need to evaluate the tax plan through a long-term lens.

Will tax reform go the planned route and drive economic growth? Changes in the corporate tax code were needed, according to Grant Thornton Chief Economist Diane Swonk. Indeed, she said, the fiscal stimulus will add about a half-percent to growth this year, much of it due to spending the tax cut. But during this near-term boost, Swonk advised, companies must prepare for a boom/bust cycle. As the stimulus fades, the price of the cut will be higher interest rates in the next couple of years. In addition, international tax cuts generally aren’t as significant as expected. Glitches have surfaced, and profits aren’t being repatriated as quickly as hoped. And then there are the responses from by other countries.

Domestically, labor shortages are acute, wages are going up and the skills gap is large. Take the opportunity, Swonk said, to redeploy tax cut savings to staff your company with a sufficient number of skilled workers.

For more on Swonk’s assessments and recommendations, watch the video.


Diane SwonkDiane Swonk
Chief Economist