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Capital Tax Reform and the Real Economy: The Effects of the 2003 Dividend Tax Cut
Abstract
This paper tests whether the 2003 dividend tax cut—one of the largest reforms ever to a US capital tax rate—stimulated corporate investment and increased labor earnings, using a quasi-experimental design and US corporate tax returns from years 1996–2008. I estimate that the tax cut caused zero change in corporate investment and employee compensation. Economically, the statistical precision challenges leading estimates of the cost-of-capital elasticity of investment, or undermines models in which dividend tax reforms affect the cost of capital. Either way, it may be difficult to implement an alternative dividend tax cut that has substantially larger near-term effects. (JEL C72, C78, C91)
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Citations
Cited by
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Zucman, G. (2014) · Journal of Economic Perspectives · doi:10.1257/jep.28.4.121 · Cited by 601
Tax Policy and Heterogeneous Investment Behavior
Zwick, E., & Mahon, J. (2017) · American Economic Review · doi:10.1257/aer.20140855 · Cited by 572
Board reforms and firm value: worldwide evidence
Fauver, L., Hung, M., Li, X., & Taboada, A. G. (2017) · Journal of Financial Economics · doi:10.1016/j.jfineco.2017.04.010 · Cited by 407
“Capitalists in the Twenty-First Century”
Smith, M., Yagan, D., Zidar, O., & Zwick, E. (2019) · The Quarterly Journal of Economics · doi:10.1093/qje/qjz020 · Cited by 263
Self-citationTaxation and Innovation in the 20th Century
Akcigit, U., Grigsby, J., Nicholas, T., & Stantcheva, S. (2018) · doi:10.3386/w24982 · Cited by 133
Metadata
- Authors
- Yagan, D.
- Venue
- American Economic Review
- Publisher
- American Economic Association
- Published
- 2015-12-01
- Volume
- 105
- Issue
- 12
- Pages
- 3531-3563
- ISSN
- 0002-8282 (ISSN-L)
- OpenAlex
- W1535661855
- Cited by
- 333
- References
- 0
- FWCI
- 92.84
- Type
- journal article
- Language
- en
- Open access
- closed
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