Shareholder Wealth Effects of Border Adjustment Taxation

Abstract

Following two decades of discussion, the border adjustment tax briefly emerged as part of proposed U.S. corporate tax reform in early 2017. While heavily debated, little empirical evidence exists regarding the border adjustment tax. We take advantage of the period during which the border adjustment tax was under strong consideration to examine its effects on shareholder value. We find that high-importing firms (measured using industry, 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