The Impact of the Tax Cuts and Jobs Act on Foreign Investment in the United States

Abstract

The 2017 Tax Cuts and Jobs Act (TCJA) sharply reduced effective corporate income tax rates on equity-financed US investment. This paper examines the reform's impact on inbound foreign investment, allowing for variation by investor country, method of finance, and industry. Preliminary findings indicate that, while foreign investment in US property, plant and equipment increased following TCJA, this appears to have been driven by macroeconomic factors, with tax policy providing no marginal stimulation. However, there is some evidence that foreign corporations increased their retained earnings in response to the lower US tax rates. These findings are consistent with other early studies of the effect of TCJA on US investment.