Do Corporate Tax Cuts Increase Income Inequality

Suresh Nallareddy, Ethan Rouen and Juan Carlos Suárez Serrato

No 7824, CESifo Working Paper Series from CESifo

Abstract: We study the effects of corporate taxes on income inequality. Using state corporate taxes as a setting, we provide evidence that corporate tax cuts lead to increases in income inequality. This result is robust across regression, matching, and synthetic controls approaches, and to controlling for a host of potential confounders. We use Statistics of Income data from the IRS to explore mechanisms behind this result. We find tax cuts lead to higher income for both top and bottom earners, but the gains to capital income for top earners exceed the gains to total income for bottom earners. This result suggests that, while all earners appear to benefit from a corporate tax cut, the relation between tax cuts and inequality is positive, in part, because high income individuals shift their compensation to reduce taxes.

Keywords: inequality; corporate tax cuts (search for similar items in EconPapers)
JEL-codes: D63 H25 H71 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Do Corporate Tax Cuts Increase Income Inequality? (2022)
Chapter: Do Corporate Tax Cuts Increase Income Inequality? (2021)
Working Paper: Do Corporate Tax Cuts Increase Income Inequality? (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_7824

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