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Title: THE ECONOMIC EFFECTS OF CORPORATE INCOME TAXATION

Citation Type: Dissertation/Thesis

Publication Year: 2011

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Abstract: This dissertation consists of three essays studying the economic impact of corpo- rate taxation. Chapter 1 models and estimates the incidence of the corporate income tax under imperfect competition. IdentiÖcation comes from variation in the e§ective marginal tax rates across industry and time. The empirical results suggest that la- bor shares the burden of corporate taxes. A ten percentage increase in the tax rates decreases the average wage rate by 0.45-0.56 percent. Consistent with the theoreti- cal prediction, the elasticity of wage with respect to the tax rates increases with the industry concentration. Labor bears at least 87 percent of the burden of corporate income taxes. The U.S. corporate income tax system provides investment incentives that vary across asset types. In Chapter 2, I study the e§ect of corporate income taxes on the allocation of new capital investment by constructing an industry-level panel data from 1962 to 1997. My preferred-IV estimates of the asset substitution elasticities suggest a sizable interasset distortion e§ect of corporate income taxes. Substitutability is the strongest between machinery equipment and computing and electronic equip- ment. Compared to a revenue-neutral uniform tax scheme, di§erential corporate income taxes cause under-investment in computing and electronic equipment and over-investment in machinery and transportation equipment. Corporations were taxed at a lower rate than non-corporate Örms in the early twentieth century. Chapter 3 examines the e§ect of relative taxation of corporate to non-corporate income using state-level panel data during 1909-1919. I Önd that the tax cost to incorporate had a signiÖcant impact on the corporate share of establish- ments and related economic activities including employment and production. The regression results suggest a large response of income shiftingñabout 1.5 to 2 more times than the largest estimates in studies using more recent data. Income shift- ing was more responsive to the tax policies during the early days of income taxes. The implicit tax subsidy encourage about 8,300 business to be organized under the corporate form during this period.

Url: https://rucore.libraries.rutgers.edu/rutgers-lib/31130/PDF/1/play/

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Authors: LIU, LI

Institution: Rutgers, The State University of New Jersey

Department: Economics

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Degree: Doctor of Philosophy

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Pages: 114

Data Collections: IPUMS CPS

Topics: Other, Poverty and Welfare

Countries: United States