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Corporate Behavioral Responses to the TCJA for Tax Years 2017-2018

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  • Tim Dowd
  • Christopher Giosa
  • Thomas Willingham

Abstract

We analyze the initial corporate response to the 2017 enactment of the “Tax Cuts and Jobs Act” (TCJA). The TCJA changed many corporate tax provisions, including a reduction of the corporate statutory tax rate from 35 percent to 21 percent effective in 2018 and sweeping changes to the taxation of income earned abroad by U.S. corporations. Based on a sample of U.S. corporate tax returns, we find that corporations accelerated deductions into 2017 and delayed income into 2018, thereby minimizing their taxes. We estimate an income and deduction shifting tax elasticity of -0.11 and 0.08, respectively. Additionally, we study detailed tax returns of 81 large corporations to understand how those changes impacted them.

Suggested Citation

  • Tim Dowd & Christopher Giosa & Thomas Willingham, 2020. "Corporate Behavioral Responses to the TCJA for Tax Years 2017-2018," National Tax Journal, National Tax Association;National Tax Journal, vol. 73(4), pages 1109-1134, December.
    • Handle: RePEc:ntj:journl:v:73:y:2020:i:4:p:1109-1134
    DOI: 10.17310/ntj.2020.4.09
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    Cited by:

    1. Thi, Hoang Ha Nguyen & Weichenrieder, Alfons J., 2021. "C and S corporation banks: Did Trump's tax reform lead to differential effects?," SAFE Working Paper Series 328, Leibniz Institute for Financial Research SAFE.
    2. Can, Ege & Fossen, Frank M., 2023. "Income Taxation and Hours Worked in Different Types of Entrepreneurship," IZA Discussion Papers 16683, Institute of Labor Economics (IZA).
    3. Christine L. Dobridge & Patrick Kennedy & Paul Landefeld & Jacob Mortenson, 2023. "The TCJA and Domestic Corporate Tax Rates," Finance and Economics Discussion Series 2023-078, Board of Governors of the Federal Reserve System (U.S.).

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