The Economic Effects of U.S. Presidential Tax Communication

Aside from affecting tax expectations, the U.S. President holds a unique position to in uence economic sentiment. We apply a probabilistic topic model and a dictionary-based sentiment analysis to extract information on the tone and the prevalence of tax policy in public statements by the U.S. president. Our econometric analyses show that prioritizing tax policy temporarily stimulates consumption, investment, and output. A positive tone in presidential tax news suggests that these results stem from sentiment effects. In accordance, we find that confidence rises and policy uncertainty decreases in response to more precise tax communication. The positive effect on output persists after controlling for tax foresight, underscoring the existence of a distinct sentiment effect.