Tax Reform Made Me Do It

Working Paper: NBER ID: w25283

Authors: Michelle Hanlon; Jeffrey L. Hoopes; Joel Slemrod

Abstract: This paper examines corporations’ actions, and statements about actions, following the tax law change known as the Tax Cuts and Jobs Act (TCJA). Specifically, we examine four different outcomes—bonuses (or other actions that benefit workers), announcements of new investments, share repurchases, and dividend announcements. We find that 4% of public firms in our sample announced in Q1 2018 they would pay some portion of their tax savings toward workers. In terms of investment, we find that 22% of the S&P 500 firms in our sample mentioned in earnings conference calls that they would increase investment because of the TCJA. We find a general increase in share repurchases following the passage of the TCJA, but the increase is extremely concentrated in a small number of firms. We find only nine firms that announced a new share repurchase plan explicitly attributed the new plan to the TCJA. In regression analysis, we find that both political and economic variables explain TCJA-linked announcements. The analysis suggests that firms with greater expected tax savings from the TCJA are those most likely to announce payments to workers and plans to increase investment. Firms with a Political Action Committee that donates more to Republican candidates are also more likely to announce benefits to employees.

Keywords: No keywords provided

JEL Codes: H20; H24; H25

Causal Claims

Cause	Effect
Higher expected tax savings from TCJA (H26)	More likely to announce actions benefiting workers (J54)
Higher expected tax savings from TCJA (H26)	Plans for increased investment (E22)
More PAC donations to Republican candidates (D72)	More likely to announce worker benefits (J39)
Highly unionized industries (J51)	Less likely to announce benefits (J32)
Certain industries (banking and retail) (L81)	Concentration of firms announcing benefits (L20)