U.S. Effective Marginal Tax Rates on New Investment Under Prior Law and the Tax Cuts and Jobs Act

U.S. Effective marginal tax rates (EMTRs) for 2018 through 2027 are calculated for the TaxCuts and Jobs Act (TCJA). These EMTRs take account of the extension and subsequent phaseout of bonus depreciation with a methodology used by Cohen, Hansen, and Hassett (2002) toestimate the user cost of capital under a temporary bonus depreciation. The EMTRs also takeaccount of several changes in the law over the 10-year period. Those changes include of theexpiration (sunset) of most of the TCJA's individual provisions at the end of calendar year 2025and the replacement of expensing for research and experimentation (R&E) intangibles withamortization in 2022. They also include the switch in the limitation on interest deductions froman earnings before interest, tax, depreciation, and amortization (EBITDA) definition of adjustedtaxable income to an earnings before interest and tax (EBIT) definition in 2022