Financing corporate tax cuts with shareholder taxes

Alexis Anagnostopoulos, Orhan Erem Atesagaoglu and Eva Cárceles‐Poveda
Authors registered in the RePEc Author Service: Eva Carceles-Poveda

Quantitative Economics, 2022, vol. 13, issue 1, 315-354

Abstract: We study the aggregate and distributional consequences of replacing corporate profit taxes with shareholder taxes, namely taxes on dividends and capital gains, in a setting with incomplete markets and heterogeneity at both the household and the firm level. The reform yields distributional gains with a large majority of households benefiting. Moreover, if dividend and capital gains are taxed at the same rate, the reform is also efficiency‐enhancing and the implied optimal corporate income tax rate is zero. In contrast, an asymmetric tax treatment of dividend and capital gains induces a trade‐off between efficiency and distributional concerns that is optimally resolved at a positive optimal corporate tax rate, implying double taxation.

Date: 2022
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Citations: View citations in EconPapers (6)

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https://doi.org/10.3982/QE1167

Related works:
Working Paper: Financing Corporate Tax Cuts with Shareholder Taxes (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:quante:v:13:y:2022:i:1:p:315-354

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