publication . Preprint . 2011

Capital Income Taxation and Progressivity in a Global Economy

Rosanne Altshuler; Benjamin Harris; Eric Toder;
Open Access
  • Published: 18 May 2011
Abstract
The increase in international capital mobility over the past two decades has put pressure on the tax treatment of corporate equity income. Corporate-level taxes distort investment flows across locations and create opportunities for tax avoidance by shifting income across jurisdictions. Outward flows of capital shift part of the burden of the corporate-level tax on equity income from capital to labor, thereby making its incidence less progressive. Individual-level taxes on corporate equity income lower the after-tax return to savings but have less distorting effects on investment location and are more likely to fall on owners of capital than workers. This logic s...
Subjects
free text keywords: corporate taxation, individual taxation, jel:H20, jel:H24, jel:H25
27 references, page 1 of 2

WHO PAYS THE CORPORATE INCOME TAX? ........................... 360

A. Open Economy Incidence in General Equilibrium Models.................................................................................... 362

B. Empirical Incidence Analysis .............................................. 366

C. Other Considerations............................................................ 369

III. EFFECTS OF A TAX SHIFT FROM THE CORPORATE TO THE INDIVIDUAL LEVEL...................................................................... 370 A. Distributional Effects............................................................ 370 B. Behavioral Responses and Revenue.................................... 372

IV. SIMULATIONS AND METHODOLOGY ......................................... 374 A. Simulations ............................................................................ 374 B. Methodology.......................................................................... 375 15 See William Randolph, International Burdens of the Corporate Income Tax 5

(Congressional Budget Office, Working Paper 2006-09, August 2006), available at

http://www.cbo.gov/ftpdocs/75xx/doc7503/2006-09.pdf. 22 This section borrows heavily from Benjamin Harris, Corporate Tax Incidence

Paper, November 2009), available at http://www.urban.org/UploadedPDF/1001349_

corporate_tax_incidence.pdf. 23 See, e.g., Kevin Hassett & Aparna Mathur, Taxes and Wages 9, 10 (Am.

Enterprise Inst., Working Paper 128, March 2006), available at http://www.aei.org/

docLib/20060602_HassettMathur.pdf. 24 See, e.g., R. Alison Felix, Passing the Burden: Corporate Tax Incidence in

Open Economies 11, 28 (Fed. Res. Bank of Kansas City, Working Paper RRWP 07-

01, 2007), available at http://www.kc.frb.org/Publicat/RegionalRWP/RRWP07-01.pdf. 25 See Jane Gravelle & Thomas Hungerford, Corporate Tax Reform: Issues for

Congress, CONGRESSIONAL RESEARCH SERVICE REPORT FOR CONGRESS, Oct. 31,

27 references, page 1 of 2
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