Working Paper: NBER ID: w18440
Authors: Laura Kawano; Joel Slemrod
Abstract: Several recent analyses have suggested that the revenue-maximizing corporate tax rate resides in the low-30's. We challenge this result by re-examining this relationship using a new compilation of changes in corporate tax base definitions for OECD countries between 1980 and 2004. By considering tax base changes in addition to tax rate changes, we can address the estimation bias that applies to tax rates absent their consideration. We find that the relationship between corporate tax rates and corporate tax revenues is tenuous. The large behavioral response to corporate tax rates implied in the literature does not obtain when accounting for persistent differences in tax policy and business environments across countries.
Keywords: No keywords provided
JEL Codes: H25
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| corporate tax rates (K34) | corporate tax revenues (H20) |
| unobserved heterogeneity (C21) | elasticity of corporate tax revenues with respect to statutory tax rates (H32) |
| enhancements to thin capitalization rules (G32) | corporate tax revenues (H20) |
| increasing taxation of foreign companies (F23) | corporate tax revenues (H20) |
| tax rate changes (H29) | changes in corporate tax base (K34) |