Are "Real" Responses to Taxes Simply Income Shifting Between Corporate and Personal Tax Bases?

Roger Gordon and Joel Slemrod

No 6576, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Two well-noted phenomena of recent decades are the increasing concentration of personal income and the declining rate of corporate profitability. This paper investigates to what extent these two trends have a common explanation extent these two trends have a common explanation-shifting of income to the personal tax base from the corporate tax base caused by the generally declining difference between personal tax rates and corporation income tax rates. This paper presents evidence that a substantial amount of income shifting has in fact occured since 1965, based on time-series regression analyses that reveal that an increase in corporate tax rates relative to personal rates resulted in an increase in reported personal income and a drop in reported corporate income, even after controlling for corproate use of debt finance and for the amount of corporate assets. We focus on one mechanism for shifting--changing the form of compensation for executives and other workers, such as between wage compensation and greater use of stock options. The potential importance of income shifting requires a reinterpretation of both the efficiency and distributional consequences of of changes in the tax structure.

JEL-codes: H20 (search for similar items in EconPapers)
Date: 1998-05
New Economics Papers: this item is included in nep-pub
Note: PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (72)

Published as Slemrod, J. (ed.) Does Atlas Shrug? The Economic Consequences of Taxing the Rich. Cambridge: Harvard University Press, 2002.

Downloads: (external link)
http://www.nber.org/papers/w6576.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:6576

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w6576

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().