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Corporate Tax Incidence

Paper Session

Sunday, Jan. 7, 2024 10:15 AM - 12:15 PM (CST)

Convention Center, 225C
Hosted By: American Economic Association
  • Chair: Owen Zidar, Princeton University and NBER

Heterogeneity in Corporate Tax Incidence by Worker Characteristics

Christine Dobridge
,
Federal Reserve Board
Patrick Kennedy
,
University of California-Los Angeles and NBER
Paul Landefeld
,
Joint Committee on Taxation
Jacob Mortenson
,
Joint Committee on Taxation

Abstract

We study how corporate tax incidence on worker earnings varies across worker characteristics: gender, age, and employment tenure. To do so, we examine effects of the corporate tax cuts introduced by the Tax Cuts and Jobs Act (TCJA), using data from federal tax records and a difference-in-differences empirical design. We find that TCJA resulted in no earnings gains below the 90th percentile of the within-firm earnings distribution for workers in any subgroup. Above the 90th percentile, we find higher wage gains for men, older workers, and workers with longer employment tenure, suggesting potentially important distributional effects of corporate tax changes.

A Simple Model of Corporate Tax Incidence

Damián Vergara Dominguez
,
Princeton University
Dustin Swonder
,
University of California-Berkeley

Abstract

We analyze the incidence of a linear corporate tax using a simple competitive general equilibrium model where workers make extensive margin labor supply decisions and capital owners decide whether to set up domestic firms or allocate their capital to foreign investment opportunities. Consistent with recent empirical evidence, the model predicts finite responses of corporate tax changes on employment, wages, capital, and pre-tax profits, and suggests that responses are increasing in the degree of capital intensity.

Who Benefits from State Corporate Tax Cuts? A Local Labor Market Approach with Heterogeneous Firms: Further Results

Juan Carlos Suarez Serrato
,
Stanford University
Owen Zidar
,
Princeton University and NBER

Abstract

This paper estimates the incidence of state corporate taxes using new data and methods for estimating the effects on profits. We extend Suarez Serrato and Zidar (2016) by developing two new identification approaches that use the effects of business taxes on the labor demand of incumbent firms and local productivity to identify profit effects. We estimate these reduced-form effects using data from Census, show how reduced-form moments identify incidence and parameters, and provide incidence estimates using a variety of reduced-form approaches as well as a structural model. Across these approaches, we find that owners bear a substantial portion of incidence. Our central estimate is that firm owners bear half of the incidence, while workers and landowners bear 35-40 percent and 10-15 percent, respectively.
JEL Classifications
  • H2 - Taxation, Subsidies, and Revenue