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Clément MALGOUYRE (Institut des Politiques Publiques), “Follow the money! Why dividends overreact to flat-tax reforms”

January 7 @ 12:15 pm - 1:30 pm

The Macroeconomics Seminar:
Time: 12:15 pm – 13:30 pm
Date: 07th of January  2022

by zoom

Clément MALGOUYRE (Institut des Politiques Publiques), “Follow the money! Why dividends overreact to flat-tax reforms”

Abstract : We estimate behavioral responses to dividend taxation using two recent French reforms: a rate hike followed, five years later, by a cut. Exploiting tax data at household and firm-level, we find very large dividend tax elasticities to both reforms. Individuals who control firms adjust dividends instantaneously and account for most of tax-induced changes in aggregate dividends. Their firms don’t react on the investment margin. The changes in dividends are instead driven by corporate saving, as owner-managers treat firms as tax-free saving vehicles. In smaller businesses, we see a negative response of profits to taxes, consistent with the notion that firms can also be tax-free consumption vehicles.

Organizers:
ARNE UHLENDORFF  (CREST)

Sponsors:
CREST