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

Danny Yagan

No 21003, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper tests whether the 2003 dividend tax cut—one of the largest reforms ever to a U.S. capital tax rate—stimulated corporate investment and increased labor earnings, using a quasi-experimental design and U.S. 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-codes: G31 G35 G38 H25 H32 (search for similar items in EconPapers)
Date: 2015-03
New Economics Papers: this item is included in nep-acc, nep-pbe and nep-pub
Note: CF PE
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Citations: View citations in EconPapers (173)

Published as Danny Yagan, 2015. "Capital Tax Reform and the Real Economy: The Effects of the 2003 Dividend Tax Cut," American Economic Review, vol 105(12), pages 3531-3563.

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Related works:
Journal Article: 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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