Corporate Taxes and Entrepreneurs’ Income: A Credit Channel

Manthos Delis, Emilios Galariotis, Maria Iosifidi and Steven Ongena

No 18762, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Corporate taxation can have redistributive effects on income and wealth. We hypothesize and empirically establish such an effect working via bank credit. We use a unique sample of small majority-owned firms that apply for credit, where only some firms (treated) experience a corporate tax cut. We show that after the decrease in corporate tax rates, the treated poorer business owners get easier access to credit. However, this policy also considerably increases loan amounts and de-creases loan spreads for the treated richer. Ultimately, reducing the corporate tax rate predominantly increases the future income and wealth of richer business owners.

Keywords: Bank credit; Economic inequality; Corporate taxes (search for similar items in EconPapers)
JEL-codes: D63 G20 G21 H25 (search for similar items in EconPapers)
Date: 2024-01
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