Downward Revision of Investment Decisions after Corporate Tax Hikes
American Economic Journal: Economic Policy (Forthcoming)
This paper estimates the causal effect of corporate tax hikes on
firm investment based on more than 1,400 local tax changes. By
observing planned and realized investment volumes in a representative sample of German manufacturing firms, we can study how
tax hikes induce firms to revise their investment decisions. On average, the share of firms that invest less than previously planned
increases by three percentage points after a tax hike. This effect is
twice as large during recessions.