Do Consumers Pay the Corporate Tax?

Martin Jacob · Maximilian A. Müller

30 citations0/0 files storedContemporary Accounting Research

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Corporate Taxation and Avoidance Economic and Fiscal Studies Fiscal Policy and Economic Growth

Abstract

Abstract Using granular gas price data and rich variation in corporate tax rates, we find that corporate taxes increase consumer prices. About 64% of the corporate tax is borne by consumers. The effect is stronger when firms have limited access to tax planning opportunities, face stricter tax enforcement, or when consumer demand is less elastic. Taxes also reduce the number of firms and their scale, consistent with a tax‐induced increase in marginal cost. Our results suggest that tax policies that increase effective corporate tax rates may have unintended consequences for consumers through higher prices.

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References

2010A review of tax research 1962The Incidence of the Corporation Income Tax 1934The Concept of Monopoly and the Measurement of Monopoly Power 1995The Concept of Monopoly and the Measurement of Monopoly Power 2000Tax Avoidance, Evasion, and Administration 2006Tax shelters and corporate debt policy 2003Taxes and Corporate Finance: A Review 2013Pass-Through as an Economic Tool: Principles of Incidence under Imperfect Competition

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2023Corporate Tax System Complexity and Investment Sensitivity to Tax Policy Changes

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