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on Public Finance |
| By: | Nils aus dem Moore |
| Abstract: | We contribute to the empirical literature on the effective incidence of corporate income taxation. We focus on the so-called direct incidence via the wage bargaining process. Building on the innovative framework of Arulampalam, Devereux and Maffini (2012), we analyze the importance of various dimensions of heterogeneity at the firm-level. In particular, we investigate the distinct effects of (i) firm size, (ii) level of profitability, and (iii) competition intensity across (iv) different economic sectors. Furthermore, we investigate the relative importance of the surrounding institutional setting. To this end, a firm-level within-country approach is pursued separately for two different economies, namely France and the United Kingdom, which can be regarded as polar cases with respect to the relevant features of the wage-setting process. However, in many respects, we find surprisingly similar results for both countries. Thereby, this paper also adds to the literature by providing new insights on the degree to which results from previous single-country studies can possibly be generalized. |
| Keywords: | Corporate income iaxation; profit taxation; tax incidence; wages; difference-in-differences |
| JEL: | H22 H25 J31 J38 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0531&r=pub |
| By: | Danny Yagan |
| Abstract: | Policymakers frequently propose to use capital tax reform to stimulate investment and increase labor earnings. This paper tests for such real impacts of the 2003 dividend tax cut—one of the largest reforms ever to a U.S. capital tax rate—using a quasi-experimental design and a large sample of U.S. corporate tax returns from years 1996-2008. I estimate that the tax cut caused zero change in corporate investment, with an upper bound elasticity with respect to one minus the top statutory tax rate of .08 and an upper bound effect size of .03 standard deviations. This null result is robust across specifications, samples, and investment measures. I similarly find no impact on employee compensation. The lack of detectable real effects contrasts with an immediate impact on financial payouts to shareholders. Economically, the findings challenge leading estimates of the cost-of-capital elasticity of investment, or undermine models in which dividend tax reforms affect the cost of capital. Either way, it may be difficult for policymakers to implement an alternative dividend tax cut that has substantially larger near-term effects. |
| JEL: | G31 G35 G38 H25 H32 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21003&r=pub |
| By: | Nils aus dem Moore |
| Abstract: | We contribute to the empirical literature on the debt bias of corporate income taxation through a micro-econometric evaluation of the so-called ACE corporate tax reform in Belgium based on firm-level accounting data. We interpret the tax reform that came into effect in January 2006 as an economic quasi experiment. We identify its causal impact on the leverage ratio of Belgian corporations by means of a difference-in-differences (DiD) approach, using corporations from the UK as comparison group. Our results document that the ACE reform led to a systematic pattern of heterogeneous effects on the capital structure of Belgian corporations, as the estimated reduction of the leverage ratio is most pronounced for big firms. Estimation of quantile treatment effects further reveals that reform effects get monotonically larger across the distribution of firm leverage. Finally, we provide evidence of sectoral heterogeneity with significant effects observed for capital-intensive but not for labor-intensive sectors. |
| Keywords: | Corporate income taxation; financial structure; debt bias; allowance for corporate equity; difference-in-differences |
| JEL: | H25 H32 H22 G32 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0533&r=pub |
| By: | Nils aus dem Moore |
| Abstract: | We contribute to the empirical literature on the relationship between corporate taxes and investment. We exploit the introduction of the so-called ACE corporate tax reform in Belgium that came into effect in January 2006 to evaluate this relationship in a quasiexperimental setting based on firm-level accounting data. To identify the causal effect of the reform on capital spending of Belgian corporations, we focus on the indirect effect of taxes on investment via their impact on free cash-flow. We use the systematic variation of the cash-flow sensitivity of investment between small and medium versus large firms to form treatment and control groups for difference-in-differences (DiD) estimations. Our benchmark results provide highly significant and robust estimates that correspond to an increase in investment activity by small and medium-sized firms of about 3 percent in response to the ACE reform. We substantiate the robustness of our results by means of triple differences estimations (DDD) that use a matched sample of French companies as an additional dimension of contrast. |
| Keywords: | Corporate income taxation; investment; capital budgeting; allowance for corporate equity; difference-in-differences |
| JEL: | H25 H32 H22 G31 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0534&r=pub |
| By: | Nils aus dem Moore; Tanja Kasten; Christoph M. Schmidt |
| Abstract: | We contribute to the empirical literature on the effective incidence of corporate income taxation by using the German Business Tax Reform of the year 2000 (GBTR 2000) as a natural experiment. Its effect on wages in the manufacturing sector is identified by means of a difference-in-differences analysis that uses French fi rms as comparison group. We provide evidence that GBTR 2000 led to a significant and sizeable wage effect. For 2001, the first year after GBTR 2000 took eff ect, we estimate a short-run effect that implies a wage increase of 7.9 percent. Due to the dynamic nature of the empirical model used, the incidence effect grows gradually over time during the evaluation period. |
| Keywords: | Corporate income taxation; tax reform; tax incidence; profit taxation; wages; difference-in-differences |
| JEL: | H22 H25 J31 J38 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0532&r=pub |