Taxes And Firm Investment?
Source of Publication
Journal Of Macroeconomics
We investigate the firm-level investment response to unanticipated narrative shocks to average personal and corporate tax rates using a universal micro dataset of publicly-traded U.S. firms for the post-1976 period. Using local projections, we show that: (i) corporate tax shocks have significant effects on investment while personal tax shocks do not; (ii) corporate income tax responses are negative overall, and this result is driven by smaller firms who face larger borrowing constraints, especially when the accompanying monetary policy is contractionary or output gap is slack; (iii) there is some evidence of positive personal income tax responses during monetary contractions by dividend-paying firms, which is consistent with the recent literature.
Tax policy, Firm-level data, Local projections, Corporate tax, Personal tax
Arin, K. Peren; Devereux, Kevin; and Mazur, Mieszko, "Taxes And Firm Investment?" (2023). All Works. 6309.
Indexed in Scopus
Open Access Type
Green: A manuscript of this publication is openly available in a repository