Corporate Taxation and the Distribution of Income

James Hines

No 27939, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Higher corporate taxes reduce corporate business operations, replacing them with operations by noncorporate businesses that are risky and have undiversified ownership. This shift contributes to income dispersion, with effects so large that higher corporate taxes can increase income inequality even when the corporate tax burden falls entirely on capital owned disproportionately by the rich. Estimates suggest that the riskiness of U.S. noncorporate business increases by 12.3% the aggregate income of the top one percent, and that income dispersion created by a higher U.S. corporate tax rate offsets more than half of the distributional effects of reducing average returns to capital.

JEL-codes: D31 H22 H25 (search for similar items in EconPapers)
Date: 2020-10
New Economics Papers: this item is included in nep-pbe and nep-pub
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