What Does the Corporate Income Tax Tax? A Simple Model Without Capital
Laurence Kotlikoff and
Jianjun Miao ()
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Laurence Kotlikoff: Department of Economics, Boston University
Annals of Economics and Finance, 2013, vol. 14, issue 1, pages 1-19
This paper challenges the traditional view of the corporate tax as taxing corporate capital rather than the act of incorporating. Our model has no capital. Entrepreneurs pay to go public to diversify their risk. In discouraging incorporation, the tax keeps more entrepreneurs private and exposed to more risk. The tax falls primarily on high-skilled entrepreneurs and to a lesser extent on labor, who experience less demand for their services. The wage reduction also induces marginal entrepreneurs to set up shop and experience more risk. Hence, the answer to the titleâ€™s question is that the corporate tax taxes risk-sharing.
Keywords: Corporate tax; Risk taking; Tax incidence; Entrepreneurship (search for similar items in EconPapers)
JEL-codes: H22 H31 H32 (search for similar items in EconPapers)
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Working Paper: What Does the Corporate Income Tax Tax? A Simple Model Without Capital (2010)
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Persistent link: http://EconPapers.repec.org/RePEc:cuf:journl:y:2013:v:14:i:1:n:1:kotlikoff
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