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Items producers enhance their capital expenditure and employment in response to a minimize in marginal company revenue tax charges or a rise in funding tax credit. In distinction, firms within the service sector largely use any tax windfall to extend dividend payouts. We base our conclusions on a novel measure of U.S. firm-specific tax shocks that mixes adjustments in statutory tax charges confronted by every agency with narrative recognized legislated U.S. federal tax adjustments between 1950 and 2006.
That’s from a new NBER working paper by James Cloyne, Ezgi Kurt, and Paolo Surico.
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