The Tax Cuts and Jobs Act: Which Firms Won? Which Lost?
60 Pages Posted: 22 Jun 2020 Last revised: 30 Jun 2020
Date Written: June 17, 2020
The Tax Cut and Jobs Act (TCJA) slashed corporations’ median effective tax rates from 31.7% to 20.8%. Nevertheless, 15% of firms experienced an increase. One fifth of firms recorded nonrecurring tax costs or benefits exceeding 3% of total assets. Proxies that existing studies employ to assess the TCJA’s impacts account for just half of actual impacts. Stock prices impounded those proxies during the legislative process. Total impacts were impounded the following year, once firms published their financials. These results indicate that investors find it hard to predict even large and immediate changes to company cash flows due to unfamiliar events.
Keywords: Corporate Taxes, Tax Cut And Jobs Act, Event Study, Market Efficiency, Tax Reform
JEL Classification: G12, G14, H25, O24
Suggested Citation: Suggested Citation