In The Hole
(Un)intended Consequences? The Impact of the 2017 Tax Cuts and Jobs Act on Shareholder Wealth
Iva Kalcheva et al.
Journal of Banking & Finance, forthcoming
Abstract:
We study the stock market reactions to the Tax Cuts and Jobs Act (TCJA), the most significant structural U.S. tax reform in over 30 years. In line with the stated intent of TCJA proponents, we find that the Act benefited highly taxed firms. However, the Act hindered firms with international operations as well as firms with high interest expense and tax losses. Counter to claims that the TCJA would quickly spur economic growth, we find that financially constrained and high growth opportunity firms did not benefit. Rather, market participants anticipate that most of the TCJA's benefits will be passed on to shareholders via higher corporate payouts. We confirm these market expectations by documenting that firms did increase payouts via repurchases after the TCJA, but did not increase their corporate investments.
Transportation Infrastructure in the US
Matthew Turner, Gilles Duranton & Geetika Nagpal
NBER Working Paper, May 2020
Abstract:
Support for massive investments in transportation infrastructure, possibly with a change in the share of spending on transit, seems widespread. Such proposals are often motivated by the belief that our infrastructure is crumbling, that infrastructure causes economic growth, that current funding regimes disadvantage rural drivers at the expense of urban public transit, or that capacity expansions will reduce congestion. In fact, most US transportation infrastructure is not deteriorating and the existing scientific literature and does not show that infrastructure creates growth or reduces congestion. However, current annual expenditure on public transit buses exceeds that on interstate construction and maintenance. The evidence suggests the importance of an examination of how funding is allocated across modes but not of massive new expenditures.
Does Fiscal Monitoring Make Better Governments? Evidence from US Municipalities
Anya Nakhmurina
Yale Working Paper, April 2020
Abstract:
I study the effect of state fiscal monitoring on municipal governance. I focus on governance outcomes related to financial reporting quality, local corruption, political entrenchment, and the financial soundness of municipalities. I exploit the staggered adoption of fiscal monitoring policies, which entail a regular review of municipal financial reporting for signs of fiscal distress. I find that the introduction of monitoring policies is associated with an increase in proxies for reporting quality, a decrease in corruption convictions, and a reduced likelihood of reelection of incumbent politicians. Consistent with the intended purpose of state monitoring, I find evidence consistent with the financial health of municipalities improving following the initiation of state monitoring, as measured with financial statement-based ratios. Collectively, my results are consistent with state fiscal monitoring improving several important aspects of municipal governance.
Taxes, Incorporation, and Productivity
Robert Barro & Brian Wheaton
Tax Policy and the Economy, 2020, Pages 91-111
Abstract:
US businesses can be C-corporations or pass-throughs in the forms of S-corporations and partnerships. C-corporate form confers benefits from perpetual existence, limited liability, potential for public trading of shares, and ability to retain earnings. However, legal changes especially since the 1980s have improved the status of pass-throughs. The C-corporate form has typically been subject to a tax wedge, which has diminished since the 1960s. In our formal model, the tax wedge determines the fraction of firms opting for C-corporate form, the level of output (business productivity), and the C-corporate share of output. This framework underlies our empirical analysis, wherein long-difference regressions for 1978-2013 show that a higher tax wedge reduces the C-corporate share of net capital stock and gross assets. A calibrated model, fit to observed total factor productivity (TFP) and C-corporate share of economic activity, implies that, for 1958-2013, the declining tax wedge and gap between C-corporate and pass-through productivity contributed 0.37% per year out of a total TFP growth rate of 1.09% per year. From 1994 to 2004, the TFP growth rate was unusually high at 2.00% per year, and the estimated contribution from the falling productivity gap between C-corporate and pass-through status was particularly large at 0.77% per year. The last channel lines up with legal changes related especially to limited liability companies.
Property Tax Information and Support for School Bond Referenda: Experimental Evidence
Eric Brunner, Mark Robbins & Bill Simonsen
Public Administration Review, forthcoming
Abstract:
This article reports on an experiment testing whether additional information influences support for bond referenda. Respondents were randomly assigned to treatment conditions that varied the way the potential implications of property tax increases were presented to voters. The results show a persistent negative effect of tax information on the probability of support for school bond referenda across all treatments. Specifically, the results show that the probability of voting yes decreased by 6 to 9 percentage points, depending on the treatment. This result persists across multiple specifications and robustness tests. The effects are consistent across populations, with only those with high levels of education showing no statistically significant effect of the treatment on their support for school referenda.
Conquering Space through Internal Improvements: Federal Nation-Building in Nineteenth-Century America
Andrew Clarke & Emily Pears
Publius: The Journal of Federalism, Spring 2020, Pages 256-279
Abstract:
Early American political leaders were tasked with sustaining a representative republic on a seemingly impossible scale. Their struggle to stave off political dissolution raises an important question for scholars of federalism. How can democratic governments integrate disparate political communities across a vast - and rapidly expanding - territory? We revisit the solution most often proposed by contemporary political leaders: a nationally directed system of internal improvements. Using a dataset of nineteenth-century appropriations, we find that patterns in internal improvement funding are consistent with a nation-building strategy. Congressional districts at the fringes of the republic received disproportionate support from the federal government, even after accounting for political preferences, positions of legislative authority, and sub-national spending patterns. Our research stands in contrast to existing work on internal improvements, which is primarily interested in testing theories of distributive politics, and contributes to a diverse body of research on federalism, nation-building, congressional politics, and American political development.