NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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The Tax Cuts and Jobs Act: Which Firms Won? Which Lost?

Alexander F. Wagner, Richard J. Zeckhauser, Alexandre Ziegler

NBER Working Paper No. 27470
Issued in July 2020
NBER Program(s):Asset Pricing, Corporate Finance, International Finance and Macroeconomics, Industrial Organization, International Trade and Investment, Productivity, Innovation, and Entrepreneurship

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.

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Document Object Identifier (DOI): 10.3386/w27470

 
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