Capital Tax Reform and the Real Economy: The Effects of the 2003 Dividend Tax Cut
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.
Published Versions
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. citation courtesy of 
Related
More from NBER
In addition to working papers, the NBER disseminates affiliates’ latest findings through a range of free periodicals — the NBER Reporter, the NBER Digest, the Bulletin on Retirement and Disability, the Bulletin on Health, and the Bulletin on Entrepreneurship — as well as online conference reports, video lectures, and interviews.
