The Tax Cuts and Jobs Act: Which Firms Won? Which Lost?

The Tax Cut and Jobs Act (TCJA) slashed corporations’ median effective tax rates from 31.7% to 20.8%. Nevertheless, 15% of firms experienced an increase. One fifth of firms recorded nonrecurring tax costs or benefits exceeding 3% of total assets. Proxies that existing studies employ to assess the TC...

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Bibliographic Details
Published inNBER Working Paper Series
Main Authors Wagner, Alexander F, Zeckhauser, Richard J, Ziegler, Alexandre
Format Paper
LanguageEnglish
Published Cambridge National Bureau of Economic Research, Inc 01.07.2020
Subjects
Corporate taxes
Deferred income taxes
Economic theory
Financial statements
Income shifting
Repatriation
Securities markets
Tax cuts
Tax planning
Tax rates
Tax reform
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Summary:The Tax Cut and Jobs Act (TCJA) slashed corporations’ median effective tax rates from 31.7% to 20.8%. Nevertheless, 15% of firms experienced an increase. One fifth of firms recorded nonrecurring tax costs or benefits exceeding 3% of total assets. Proxies that existing studies employ to assess the TCJA’s impacts account for just half of actual impacts. Stock prices impounded those proxies during the legislative process. Total impacts were impounded the following year, once firms published their financials. These results indicate that investors find it hard to predict even large and immediate changes to company cash flows due to unfamiliar events.
ISSN:0898-2937
DOI:10.3386/w27470