Working Paper: NBER ID: w31278
Authors: James Cloyne; Ezgi Kurt; Paolo Surico
Abstract: Goods producers increase their capital expenditure and employment in response to a cut in marginal corporate income tax rates or an increase in investment tax credits. In contrast, companies in the service sector mostly use any tax windfall to increase dividend payouts. We base our conclusions on a novel measure of U.S. firm-specific tax shocks that combines changes in statutory tax rates faced by each firm with narrative identified legislated U.S. federal tax changes between 1950 and 2006.
Keywords: Corporate Tax Cuts; Investment; Employment; Dividend Payouts; Tax Policy
JEL Codes: E32; E62; H32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Corporate tax cuts (H29) | Increased capital expenditure (G31) |
| Corporate tax cuts (H29) | Increased wage bills (J39) |
| Corporate tax cuts (H29) | Increased dividend payouts (G35) |
| Corporate tax cuts (H29) | No increase in investment or employment (E22) |
| Tax cuts (H29) | Differential impact across sectors (F69) |