Who Bears the Corporate Tax? A review of What We Know

Alan Auerbach

No 11686, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper reviews what we know from economic theory and evidence about who bears the burden of the corporate income tax. Among the lessons from the recent literature are: 1. For a variety of reasons, shareholders may bear a certain portion of the corporate tax burden. In the short run, they may be unable to shift taxes on corporate capital. Even in the long run, they may be unable to shift taxes attributable to a discount on "old" capital, taxes on rents, or taxes that simply reduce the advantages of corporate ownership. Thus, the distribution of share ownership remains empirically quite relevant to corporate tax incidence analysis, though attributing ownership is itself a challenging exercise. 2. One-dimensional incidence analysis -- distributing the corporate tax burden over a representative cross-section of the population -- can be relatively uninformative about who bears the corporate tax burden, because it misses the element timing. 3. It is more meaningful to analyze the incidence of corporate tax changes than of the corporate tax in its entirety, because different components of the tax have different incidence and incidence relates to the path of the economy over time, not just in a single year.

JEL-codes: H22 H25 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn and nep-pbe
Date: 2005-10
Note: PE
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Chapter: Who Bears the Corporate Tax? A Review of What We Know (2006)
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