Capital Tax Reform and the Real Economy: The Effects of the 2003 Dividend Tax Cut

Danny Yagan

American Economic Review, 2015, vol. 105, issue 12, 3531-63

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)

JEL-codes: C72 C78 C91 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/aer.20130098
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Citations: View citations in EconPapers (180)

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Working Paper: Capital Tax Reform and the Real Economy: The Effects of the 2003 Dividend Tax Cut (2015)
Working Paper: Capital tax reform and the real economy: the effects of the 2003 dividend tax cut (2013)
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