Full Citation

Title: TO CUT OR NOT TO CUT? ON THE IMPACT OF CORPORATE TAXES ON EMPLOYMENT AND INCOME

Citation Type: Working Paper

Publication Year: 2014

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Abstract: Do corporate tax increases destroy jobs? And do corporate tax cuts boost employment? Answering these questions has proved empirically challenging. We propose an identification strategy that exploits variation in corporate income tax rates across U.S. states. Comparing contiguous counties straddling state borders over the period 1970 to 2010, we find that increases in corporate tax rates lead to significant reductions in employment and wage income, while corporate tax cuts only boost economic activity if implemented during recessions. Our spatial- discontinuity approach permits a causal interpretation of these findings by both establishing a plausible counterfactual and overcoming biases resulting from the fact that tax changes are often prompted by changes in economic conditions.

Url: https://www.nber.org/papers/w20753.pdf

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Authors: Ljungqvist, Alexander; Smolyansky, Michael

Series Title: NBER WORKING PAPER SERIES

Publication Number: 20753

Institution: NBER

Pages: 57

Publisher Location:

Data Collections: IPUMS NHGIS

Topics: Labor Force and Occupational Structure, Other

Countries: United States