The surge in the stock market and wave of firms announcing wage increases and bonuses since the Tax Cut and Jobs Act passed have fuelled optimism that tax cuts are reviving “animal spirits” and providing a big boost to economic growth. But many of these stories simply reflect the mature stage of the economic cycle and, in any case, still imply that almost all of the immediate benefits of the business tax cuts will go to shareholders. With the bulk of the personal tax cuts going to higher earners as well, the fiscal multiplier in the short-run is likely to be low.
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