This study examines the impact of the Tax Cuts and Jobs Act of 2017 (TCJA) on U.S. corporate investment. We examine U.S. firms and compare them to Canadian firms from 2017 to 2019 in a multivariate firm fixed-effects difference-in-differences analysis. Our results indicate that investment increases for U.S. firms relative to Canadian firms after the tax cuts. We also find that firms with high levels of cash held abroad before the tax cuts and those that shift the most cash back to the U.S. after the tax cuts increase investment the most. Furthermore, we exploit a provision in the TCJA that allows firms to immediately deduct the full cost of assets with lives of less than 20 years by showing that the increase in investment is concentrated among firms with shorter asset lives. Finally, we show that for U.S. based firms, assets increase for their domestic but not their foreign operations. The paper contributes to the literature by providing systematic evidence on the effects of the TCJA which have been debated extensively by politicians, journalists, tax policy experts, and academics.
Crawford, Steve and Markarian, Garen