Corporate Tax Cuts, Firm Growth, and Workers' Earnings
Abstract
We study the effects of the largest corporate income tax cut in U.S. history on firms and workers. To identify causal effects, we use employer-employee matched tax records and event studies comparing similarly sized firms in the same industry that faced divergent tax changes due to their pre-existing legal status. Tax cuts cause increases in firms' investment, sales, profits, employment, and payrolls, with earnings gains concentrated among highly paid workers. In the short-run, 87% of private income gains flow to the top 10% of the income distribution.
Fields of Study & Subjects
Corporate Taxation and Avoidance
Economic Policies and Impacts
Taxation and Compliance Studies
Publication details
- Journal / source
- American Economic Review
- Publisher
- American Economic Association
- Volume
- 116
- Issue
- 9
- Pages
- 3380–3422
- Publication date
- 28 August 2026
- Language
- EN