Croce, Mariano MKung, HowardNguyen, Thien TungSchmid, Lukas2023-05-222023-05-222012-01-012016-06-08https://repository.upenn.edu/handle/20.500.14332/34430The surge in public debt triggered by the financial crisis has raised uncertainty about future tax pressure and economic activity. We examine the asset pricing effects of fiscal policies in a production-based general equilibrium model in which taxation affects corporate decisions by: (1) distorting profits and investment; (2) reducing the cost of debt through a tax shield; and (3) depressing productivity growth. In settings with recursive preferences, these three tax-based channels generate sizable risk premia, making tax uncertainty a first-order concern. We document further that corporate tax smoothing can substantially alter the effects of public expenditure shocks.This is a pre-copyedited, author-produced PDF of an article accepted for publication in Review of Financial Studies following peer review. The version of record is available online at: http://dx.doi.org/10.1093/rfs/hhs060.FinanceFinance and Financial ManagementArticle