Corporate Taxes and Retail Prices

Scott Baker, Stephen Teng Sun and Constantine Yannelis

No 27058, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Higher corporate taxes must result in lower payments to shareholders, lower wages, or higher product prices. We study the impact of corporate taxes on barcode-level product prices using linked survey and administrative data. Our empirical strategy exploits the dichotomy between the location of production and the location of sales, providing estimates free from confounding local demand shocks. We find significant effects of corporate taxes on prices with a net-of-tax elasticity of 0.24. We find null effects on prices for firms subject to personal income taxes or to full sales apportionment. Approximately half of corporate tax incidence falls on consumers, suggesting that models used by policymakers may significantly underestimate the incidence of corporate taxes on consumers. Pass-through is larger for products purchased by high-income households, higher priced goods, and in less competitive markets.

JEL-codes: G38 H22 H25 (search for similar items in EconPapers)
Date: 2020-04
New Economics Papers: this item is included in nep-gen, nep-ore, nep-pbe and nep-pub
Note: CF LE LS PE PR
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Citations: View citations in EconPapers (10)

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