This week is the first anniversary of the passage of the Tax Cuts and Jobs Act. The first meaningful reform to the federal tax code in a generation, the Tax Cuts and Jobs Act was historic, but it was not perfect. A year after its adoption, it’s important to take a step back to review the reforms’ impacts on individuals, businesses, and the U.S. economy.

The Impact on Individuals

The Tax Cuts and Jobs Act lowered tax rates and simplified the individual income tax for most filers. The Act nearly doubled the standard deduction to $12,000 for individuals and $24,000 for married couples in 2018. The number of individuals taking the standard deduction will increase in 2018 from approximately 70 percent of returns to approximately 90 percent, reducing compliance costs by $3 billion to $5 billion annually.

The Tax Cuts and Jobs Act also limited several key deductions, such as the mortgage interest deduction and state and local taxes paid deduction. It reformed the alternative minimum tax and doubled the exemption for the estate tax.

While much ink has been spilled about the impacts of each of those provisions on their own, the net impact of the Tax Cuts and Jobs Act on individuals is that 80 percent of filers will see a lower tax liability in 2018, with another 15 percent having no material change. Only 5 percent of taxpayers will pay more in taxes in 2018 than they did in 2017. And, as the map below shows, on average, taxpayers in every income group in every congressional district in America will see a net tax cut.

Individuals looking to calculate their own tax savings can use our tax calculator.

The Impact on Businesses

The Tax Cuts and Jobs Act made dramatic changes to the business tax code in the U.S. The corporate income tax rate was lowered from 35 percent to 21 percent, capital investments can be fully deducted until 2022, and we moved to a quasi-territorial system, meaning that businesses are only taxed (with notable exceptions) on their income earned in the U.S., not abroad.

Our Taxes and Growth model estimates that lowering the corporate income tax rate will increase long-run GDP by 2.6 percent, increase worker pay, and grow the U.S. capital stock as firms find that more investments are now profitable.

The Act did include a few provisions which will slow economic growth in the long run, such as requiring research and development expenses to be amortized and tightening the interest deduction cap in 2022.

The Impact on the U.S. Economy

All told, the Tax Foundation Taxes and Growth model estimates that the Tax Cuts and Jobs Act will increase long-run GDP by 1.7 percent, create 339,000 jobs, and raise wages by 1.5 percent. It will reduce federal revenues by $1.47 trillion on a conventional basis and $448 billion on a dynamic basis over the 10-year budget window.

Now that we’re a year out since the law’s passage, what evidence can we point to on how the Act has impacted the U.S economy? The answer is, very little.

First, the law’s design is such that the economic impacts are long-run. It takes several years for the lower cost of capital to impact investment. Firms need time to plan, purchase, and permit new investments before they put the items into service. As we noted in our original score, much of the acceleration of growth happens several years after the law’s original passage, before fading as provisions in the law expire.

Second, it is always difficult to spot the impact of policy changes in economic data. Economic data is noisy. The monthly jobs report, for example, has an error rate exceeding 100,000 jobs a month. In November, the U.S. economy is reported to have created 155,000 new jobs, but that number should be understood to mean somewhere between 55,000 or 255,000 jobs. And even if we knew the exact number of jobs created, we can’t say with certainty if that is because of the tax changes made or any other fiscal policy.

When economists discuss the impacts of policies on economic indicators, we discuss it based on a concept known as ceteris paribus, translated as “other things equal.” For instance, when we say that the Tax Cuts and Jobs Act will increase long-run GDP by 1.7 percent in the long run, that means 1.7 percent with all other things being constant. Unfortunately, the U.S. economy isn’t constant. To truly see the 1.7 percent growth, we’d need to look at the U.S. economy a decade (or longer) from now in isolation, but we can’t. Counterfactuals don’t exist in fiscal policy, making this even more difficult. We will never be able to point to a specific data point and say, “That there, that’s the Tax Cuts and Jobs Act.”

Third, other policy changes mitigate the impacts of tax reform on the U.S. economy. The Trump Administration’s tariff policy is a great example. The Taxes and Growth model estimates that the new implemented tariffs will slow GDP by 0.12 percent and cost the U.S. economy 94,000 jobs. That policy works against the interests of tax reform. While the aforementioned jobs report for November said 155,000 new jobs were created, would that have been higher without the tariffs or lower without tax reform? Sadly, this is quite difficult to say with a definite answer.

Conclusion

While this is frustrating for political narratives, it is the reality of economic policy analysis. So, a year after the Tax Cuts and Jobs Act, we know that 80 percent of individuals will pay lower taxes this year than last year; we know that businesses now have a lower cost of capital; and we know taxes are simpler in many ways. We know these things should increase investment and grow the economy. But we also know we can’t say with certainty whether any economic data point is solely due to the Tax Cuts and Jobs Act.