Shareholder Wealth Effects of Border Adjustment Taxation
62 Pages Posted: 24 Apr 2017 Last revised: 26 Jan 2018
Date Written: January 25, 2018
Following two decades of discussion, the border adjustment tax briefly emerged as part of proposed U.S. corporate tax reform in early 2017. While it was heavily debated, little empirical evidence exists regarding the border adjustment tax. We take advantage of the recent period during which the border adjustment tax was under strong consideration to examine its effects on shareholder value. Contrary to predictions that the tax would be trade neutral, we find firms in high import industries (e.g., retailers), measured using both aggregate government industry data and firm-level shipping container data, suffer negative returns on days the tax had a greater likelihood of adoption. We also find that firms lobbying for border adjustment experience positive returns over that same time period.
Keywords: Border Adjustment Tax, Border Tax, Corporate Tax, Fundamental Tax Reform
JEL Classification: H25, K34
Suggested Citation: Suggested Citation