Working Paper: NBER ID: w20289
Authors: Juan Carlos Suarez Serrato; Owen Zidar
Abstract: This paper estimates the incidence of state corporate taxes on the welfare of workers, landowners, and firm owners using variation in state corporate tax rates and apportionment rules. We develop a spatial equilibrium model with imperfectly mobile firms and workers. Firm owners may earn profits and be inframarginal in their location choices due to differences in location-specific productivities. We use the reduced-form effects of tax changes to identify and estimate incidence as well as the structural parameters governing these impacts. In contrast to standard open economy models, firm owners bear roughly 40% of the incidence, while workers and landowners bear 30-35% and 25-30%, respectively.
Keywords: Corporate Tax Cuts; Local Labor Markets; Heterogeneous Firms; Welfare Effects; Tax Incidence
JEL Codes: F22; F23; H2; H22; H25; H32; H71; J23; J3; R23; R30; R58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| firm owners (L84) | incidence of corporate tax changes (H22) |
| workers (J82) | incidence of corporate tax changes (H22) |
| landowners (Q15) | incidence of corporate tax changes (H22) |
| corporate tax cuts (K34) | establishment growth (O43) |
| establishment growth (O43) | wages (J31) |
| establishment growth (O43) | rental costs (R21) |