Follow the Money! Combining Household and Firm-Level Evidence to Unravel the Tax Elasticity of Dividends

44 Pages Posted: 16 Dec 2019

See all articles by Laurent Bach

Laurent Bach

ESSEC Business School - Finance Department; Swedish House of Finance

Antoine Bozio

Paris School of Economics (PSE)

Brice Fabre

Institut des politiques publiques (PSE)

Arthur Guillouzouic

Institut des politiques publiques (PSE); Sciences Po - Department of Economics

Claire Leroy

Institut des politiques publiques (PSE)

Clément Malgouyres

Paris School of Economics (PSE); Institut des politiques publiques (PSE)

Date Written: November 18, 2019

Abstract

We estimate the tax elasticity of dividends using two recent French reforms: a hike in the dividend tax rate followed, five years later, by a cut. To follow the cash movements within the balance sheets of households and firms caused by these reforms, we use newly-accessible personal and corporate tax registries. Following the tax increase, the elasticity of dividends equals four and there is no shifting towards other personal income categories. We find instead an increase in companies’ spending. After the tax decrease, payouts revert to their initial level, but not enough to offset the amounts received during the high-tax period.

Keywords: Dividend tax; Intertemporal income shifting; Firm behavior

JEL Classification: G35, H24, O16

Suggested Citation

Bach, Laurent and Bozio, Antoine and Fabre, Brice and Guillouzouic, Arthur and Leroy, Claire and Malgouyres, Clément, Follow the Money! Combining Household and Firm-Level Evidence to Unravel the Tax Elasticity of Dividends (November 18, 2019). Available at SSRN: https://ssrn.com/abstract=3494923 or http://dx.doi.org/10.2139/ssrn.3494923

Laurent Bach

ESSEC Business School - Finance Department ( email )

Avenue Bernard Hirsch
BP 105 Cergy Cedex, 95021
France

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

Antoine Bozio

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

Brice Fabre

Institut des politiques publiques (PSE) ( email )

48 boulevard Jourdan
Paris, 75014
France

HOME PAGE: http://https://www.parisschoolofeconomics.eu/en/fabre-brice/

Arthur Guillouzouic

Institut des politiques publiques (PSE) ( email )

48 boulevard Jourdan
Paris, 75014
France

Sciences Po - Department of Economics ( email )

28, rue des Saints-Pères
Paris, Paris 75007
France

Claire Leroy

Institut des politiques publiques (PSE) ( email )

48 boulevard Jourdan
Paris, 75014
France

Clément Malgouyres (Contact Author)

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

Institut des politiques publiques (PSE) ( email )

48 boulevard Jourdan
Paris, 75014
France

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