M-RCBG Faculty Working Paper Series No. 2020-02

The Tax Cut and Jobs Act: Which Firms Won? Which Lost?

Alexander F. Wagner, Richard Zeckhauser, Alexandre Ziegler

June 2020


The Tax Cut and Jobs Act (TCJA) slashed corporations' median effective tax rates from 31.7% to  20.8%. Nevertheless, 15% of firms experienced an increase. One fifth of firms recorded nonrecurring tax costs or benefits exceeding 3% of total assets. Proxies that existing studies employ to assess the TCJA's impacts account for just half of actual impacts. Stock prices impounded those proxies during the legislative process. Total impacts were impounded the following year, once firms published their financials. These results indicate that investors find it hard to predict even large and immediate changes to company cash flows due to unfamiliar events.

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