National Tax Journal

Measuring the Burden of the Corporate Income Tax under Imperfect Competition

Li Liu, and Rosanne Altshuler

66 National Tax Journal 215-37 (March 2013)

Abstract:

We model and estimate the incidence of the corporate income tax under imperfect competition. Identification comes from variation in effective marginal tax rates in the United States across industries and time. Our empirical results suggest that labor bears a significant portion of the burden of the corporate income tax. In addition, we find that the elasticity of wages with respect to the corporate marginal effective tax rate increases with industry concentration. Over all industries, our estimates suggest that a $1.00 increase in corporate tax revenue decreases wages by approximately $0.60.

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