The Role of Taxes in the Disconnect Between Corporate Performance and Economic Growth

• 成果类型: Article
• 署名作者: Khan, Urooj; Nallareddy, Suresh; Rouen, Ethan
• 署名单位: Columbia University; Duke University; Harvard University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2019.3350
• 发表日期: 2020
• 页码: 5427-5447
• 关键词: Taxes; Economic growth; corporate earnings; investments; American Job Creation Act of 2004

摘要

We investigate the relation between corporate performance and overall economic growth in the United States. In particular, we focus on the impact of the U.S. corporate tax regime on this relation. Exploiting time-series variation and a tax shock, we document that the relatively higher corporate income tax rate and the tax treatment of foreign earnings of U.S. corporations have contributed to a disconnect between the performance of the corporate sector and the overall economy. Specifically, the growth of domestic (national) corporate profits, on average, has outpaced the growth of the domestic (national) economy, and this disconnect increases as the difference between the U.S. corporate income tax rate and the average tax rate of the other Organisation for Economic Co-operation and Development countries increases. The underlying mechanism is fewer corporate profits being channeled into subsequent domestic investments when the U. S. tax rate is relatively higher, leading to lower economic growth. Our findings have implications for policy setters.