Must-read: Danny Yagan: “Capital Tax Reform and the Real Economy: The Effects of the 2003 Dividend Tax Cut”

Must-Read: Danny Yagan: Capital Tax Reform and the Real Economy: The Effects of the 2003 Dividend Tax Cut: “This paper tests whether the 2003 dividend tax cut…

…stimulated corporate investment and increased labor earnings, using a quasi-experimental design and US corporate tax returns from years 1996–2008. I estimate that the tax cut caused zero change in corporate investment and employee compensation…. 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…