Harvard Business School
383 Morgan Hall
Boston, MA 02163
Institutional Affiliation: Harvard Business School
NBER Working Papers and Publications
|May 2018||Do Corporate Tax Cuts Increase Income Inequality?|
with Suresh Nallareddy, Juan Carlos Suárez Serrato: w24598
We study the effects of corporate taxes on income inequality. Using state corporate taxes as a setting, we provide evidence that corporate tax cuts lead to increases in income inequality. This result is robust across regression and matching approaches, and to con- trolling for a host of potential confounders. We use Statistics of Income data from the IRS to explore mechanisms behind this result. We find tax cuts lead to higher reported capital income for top earners. This shows that one mechanism for the relation between tax cuts and inequality is that high income individuals shift their compensation to avoid taxes.