This is the first comprehensive, quantitative study of how the Tax Cuts and Jobs Act (TCJA) impacts individual taxpayers. Although this study has a specific focus on equity, it also broadly considers how the TCJA benefits and harms the tax system. Relative to equity, this study finds that the TCJA granted a roughly even tax cut across all income groups—on a percentage basis. However, as high-income taxpayers pay the majority of income taxes, this group received the largest tax cut in absolute dollars. Next, the results indicate that certain convenience-focused TCJA provisions (e.g., reduced itemized deductions) did not reduce related desirable economic activities (e.g., charitable giving), implying that these provisions were successful. Finally, the U.S. tax system raised similar tax revenues pre- and post-TCJA, implying that economic growth largely covered the costs of the Act. The study concludes by discussing how its findings inform policy and future studies.

We use publicly available information to estimate the country location of multinational firms’ cash holdings, examine why investors discount the value of cash held overseas, and examine whether that discount changes after the Tax Cuts and Jobs Act (TCJA) of 2017. We provide three main results. First, our firm-year foreign cash estimates are reasonably accurate, evidenced by high correlations with simulated data and proprietary country-level data, high adjusted R² when explaining a firm’s total cash holdings, and the ability to replicate prior findings. Second, we demonstrate that investors value foreign cash holdings more negatively than domestic cash holdings when the cash is held in high agency-cost countries. Finally, we find that investors no longer appear to discount foreign cash after the TCJA, when the U.S. moved from a worldwide to a quasi-territorial taxation system.

This study uses confidential information on foreign affiliate assets to investigate whether the Tax Cuts and Jobs Act of 2017 (TCJA) alleviated investment frictions created by permanently reinvested earnings (PRE) reported in U.S. multinational corporations' (MNCs) consolidated financial statements. We begin by investigating the repatriation behavior of MNCs surrounding enactment of the TCJA. Consistent with accounting creating frictions within the MNC, we document that repatriations are greater for firms with relatively more PRE held in cash. Relatedly, we find that domestic investment by MNCs with above median PRE held in cash is more sensitive to domestic cash flow than other firms before but not after the TCJA. Overall, our results are consistent with PRE being associated with internal capital market frictions which were alleviated after the TCJA.

The Tax Cuts and Jobs Act of 2017 (TCJA) introduced substantial changes to the U.S. corporate tax system, including a lower statutory tax rate and the adoption of a more territorial-like international tax framework. Many of the international provisions were meet with significant uncertainty regarding implementation and application for corporate tax positions. We present a theoretical framework that models a firm’s choice regarding the amount of risk firms are willing to take on their tax positions. We empirically test our predictions using measures of tax risk, uncertainty, and firm-level behavior before and after the TCJA. Our results suggest that the positive association between tax uncertainty and tax avoidance declines significantly after the TCJA, particularly for firms with tax haven subsidiaries. Our findings suggest that policy interventions that reduce incentives for elaborate tax planning can meaningfully reduce corporate tax risk-taking. This evidence provides insights for policymakers and stakeholders seeking to lower incentives for highly risky and aggressive tax planning strategies.

The Tax Cuts and Jobs Act of 2017 (TCJA) introduced substantial changes to the U.S. corporate tax system, including a lower statutory tax rate and the adoption of a more territoriallike international tax framework. These shifts carry important implications for the complexity of corporate tax positions. We present a theoretical framework that models a firm's choice regarding the complexity of tax positions. We then empirically test its predictions using measures of tax risk, uncertainty, and firm-level behavior before and after the TCJA. Our results suggest that the positive association between tax uncertainty and tax avoidance declines significantly after the TCJA, particularly for firms with tax haven subsidiaries. Contrary to recent claims that corporate tax complexity would persist or worsen without deliberate efforts to simplify the tax code, our findings suggest that policy interventions that reduce incentives for elaborate tax planning can meaningfully simplify corporate tax positions. This evidence provides insights for policymakers and stakeholders seeking to design more efficient and equitable tax systems.

The Tax Cuts and Jobs Act (TCJA) of 2017 represents the most significant reform of the U.S. income tax code since the Tax Reform Act of 1986. Previous analyses of the TCJA's economic impact often rely on projections based on data prior to the enactment of the legislation. This paper leverages plausibly exogenous variations in state-level tax changes brought about by the TCJA and employs local projections with two-way fixed effects to examine its effects on the labor market. Measures of TCJA tax shocks are constructed with the NBER-TAXSIM model using state-level tax return data from the Statistics of Income (SOI). Our findings suggest that tax cuts amounting to 1 percent of Adjusted Gross Income (AGI) under the TCJA are associated with a 1 percentage point increase in the labor force participation rate (LFPR) and a 1.5 percentage point acceleration in job growth over the two years following the TCJA's implementation. These results appear broadly robust to assumptions about heterogeneous state responses and the inclusion of interactive fixed effects.

For a place-based policy to succeed, it must target the right areas—typically those with lower economic development and resident well-being. The U.S. has two major place-based tax policies: the New Markets Tax Credit (NMTC), where government- approved entities select investments, and Opportunity Zones (OZs), where private in- vestors choose projects. Despite underlying design differences, both target census tracts with high poverty rates, lower median income and weaker labor markets. However, OZs tend to attract more investment in areas with higher pre-existing private investment, often located in prosperous counties and high-growth regions. Census tracts lacking investment from either program generally show lower private investment, less home value growth, and less population growth, suggesting that additional policies may be needed to reach areas less primed for investment.

We investigate whether the Tax Cuts and Jobs Act (TCJA) impacts labor investment efficiency. By lowering the top corporate tax rate from 35 % to 21 %, ceteris paribus, the TCJA provides firms with a cash windfall. Based on difference-in-differences analysis using non-US based firms as a control group, we find that in the post-TCJA years, labor investment inefficiency increased for US based, but not for non-US based, firms. Further, the increase in labor investment inefficiency is concentrated among US firms with high cash holdings, suggesting that these firms face higher agency costs in the post-TCJA period. Additional analysis suggests that in the post-TCJA period, managers of high cash holding firms were seeking a quiet life. We find weak evidence that strong corporate governance mitigated this negative behavior. Overall, our findings show that tax reform can impact labor investment efficiency and should be of interest to investors, boards of directors, tax authorities, and to researchers.

Venture capital (VC) funds are sophisticated asset managers that focus on generating returns for investors. Despite this fact, extensive research concludes that VC funds use a tax-inefficient organizational form for their investments (i.e., startups), incurring a tax cost of about 5% of funds’ invested capital. Using a model that more fully incorporates VC fund taxation, we find the opposite result: analyzing the same data as prior research, we find that VC funds save about 8% of invested capital by using their startups’ current organizational form versus the alternative. However, this advantage is not borne equally by investors, including fund managers who face additional tax costs under the current organizational form. We also find that the Tax Cuts and Jobs Act of 2017 reduces the tax advantage of VC-backed startups’ current organizational form. Our model informs VC fund managers evaluating organizational form choice and policymakers considering potential outcomes of tax changes.

This study examines the impact of the Tax Cuts and Jobs Act of 2017 (TCJA) on domestic labor union bargaining strength faced by U.S. multinational corporations (MNCs). Before TCJA, U.S. MNCs operated under a worldwide tax system that imposed incremental U.S. taxes on earnings repatriated from overseas, prompting MNCs to leave large cash balances abroad while simultaneously allowing them to strategically shelter cash from domestic union demands to preserve their bargaining power. The TCJA resolves such “trapped cash” concerns by allowing U.S. MNCs to repatriate foreign cash without incurring incremental U.S. tax. This allows domestic workers to access previously sheltered foreign cash reserves, thereby strengthening the bargaining power of unions representing domestic workers. Consistent with our prediction, we find that MNCs become more vulnerable to both potential and enacted collective bargaining power of labor unions after TCJA, evidenced by increases in union membership rates and both the frequency and duration of strikes, respectively. In additional analyses using an entropy-balanced sample of MNCs, we provide supporting evidence that TCJA’s “unchaining” of previously trapped foreign cash is the primary channel through which potential union strength increases ex-post.

The Tax Cuts and Jobs Act (TCJA) is one of the most significant US tax reforms in 40 years. However, we know little about the TCJA’s macroeconomic effects, presumably due to the difficulty in distinguishing the law’s effects from other factors that affect the macroeconomy. In this paper, I create a new methodology that allows a researcher to use firms’ market reactions to identify the effects of a macroeconomic shock on the broader economy. I apply this method to the TCJA to identify its effects on GDP and wages. I find that the TCJA increased GDP and total wages paid to employees by 2.2% and 3.4%, respectively. I find that the total wage increase was driven by a 1.7% increase in employment and a 1.3% increase in annual salaries. In other words, I find the TCJA created 2 million jobs and increased average annual salaries by $520.

The 2017 Tax Cut and Jobs Act reduced the US corporate tax rate and introduced provisions to curb profit shifting. We combine survey data, tax data, and firm financial statements to study the evolution of the geographical allocation of US firms’ profits after the reform. The share of profits booked abroad by US multinationals fell 3–5 percentage points, driven by repatriations of intellectual property to the US. The share of foreign profits booked in tax havens remained stable around 50% between 2015 and 2020. Changes in the global allocation of profits are small overall, but some firms responded strongly.