Tax Reform Made Me Do it!

58 Pages Posted: 26 Nov 2018

See all articles by Michelle Hanlon

Michelle Hanlon

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Jeffrey Hoopes

University of North Carolina (UNC) at Chapel Hill

Joel B. Slemrod

University of Michigan, Stephen M. Ross School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2018

Abstract

This paper examines corporations’ actions, and statements about actions, following the tax law change known as the Tax Cuts and Jobs Act (TCJA). Specifically, we examine four different outcomes—bonuses (or other actions that benefit workers), announcements of new investments, share repurchases, and dividend announcements. We find that 4% of public firms in our sample announced in Q1 2018 they would pay some portion of their tax savings toward workers. In terms of investment, we find that 22% of the S&P 500 firms in our sample mentioned in earnings conference calls that they would increase investment because of the TCJA. We find a general increase in share repurchases following the passage of the TCJA, but the increase is extremely concentrated in a small number of firms. We find only nine firms that announced a new share repurchase plan explicitly attributed the new plan to the TCJA. In regression analysis, we find that both political and economic variables explain TCJA-linked announcements. The analysis suggests that firms with greater expected tax savings from the TCJA are those most likely to announce payments to workers and plans to increase investment. Firms with a Political Action Committee that donates more to Republican candidates are also more likely to announce benefits to employees.

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Suggested Citation

Hanlon, Michelle and Hoopes, Jeffrey and Slemrod, Joel B., Tax Reform Made Me Do it! (November 2018). NBER Working Paper No. w25283. Available at SSRN: https://ssrn.com/abstract=3290418

Michelle Hanlon (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

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Jeffrey Hoopes

University of North Carolina (UNC) at Chapel Hill

Joel B. Slemrod

University of Michigan, Stephen M. Ross School of Business ( email )

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United States
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