Motivated by the Jobs and Growth Tax Relief Reconciliation Act (JGTRRA) of 2003, we study the effects of capital income tax cuts in an economy with heterogeneous households and a representative, mature firm. Dividend tax cuts, contrary to capital gains tax cuts, lead to a decrease in investment...

This paper studies a model of corporate finance in which firms use stock issuance to finance investment. We assume that the firm is "rational" and therefore recognizes the relationship between future dividends and stock prices. Under this assumption, future variables enter in the constraints of...