Taxes and firm investment

Kerim Arin, Kevin Devereux and Mieszko Mazur

Journal of Macroeconomics, 2023, vol. 76, issue C

Abstract: 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.

Keywords: Tax policy; Firm-level data; Local projections; Corporate tax; Personal tax (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Working Paper: Taxes and firm investment (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:76:y:2023:i:c:s0164070423000174

DOI: 10.1016/j.jmacro.2023.103517

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