Michelle Hutchens, Daniel P. Lynch, Bridget Stomberg

Sharing the Wealth: The Effects of Announced TCJA Bonuses on Employee Pay Satisfaction

  • Finance
  • Accounting

ABSTRACT Many corporations publicly announced plans to share windfalls from the Tax Cuts and Jobs Act (TCJA) with rank-and-file employees. We examine the association between these bonus announcements and workers’ pay satisfaction. Although employees are better off upon receiving the bonuses, prior literature suggests employees can be dissatisfied with awards they perceive as small or inequitable. By linking the bonuses to a corporate tax windfall, firms provided a reference point for employees to assess fairness. Using a difference-in-differences design, we find a greater decline in pay satisfaction at firms announcing a TCJA bonus relative to firms that do not. We also provide evidence of greater dissatisfaction among employees who perceive their share of the windfall as unfairly small. Considering increasing income disparity in the U.S. and a heightened focus on corporate taxes, we provide new and timely insights into how workers respond to changes in compensation linked to corporate tax savings. Data Availability: Data are available from the sources cited in the text. JEL Classifications: H25; M52.

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