Do Higher Corporate Taxes Reduce Wages?

Fuest, Clemens; Peichl, Andreas; Siegloch, Sebastian (2017): Do Higher Corporate Taxes Reduce Wages? Micro Evidence from Germany. ifo Working Paper No. 241

Abstract

This paper estimates the incidence of corporate taxes on wages using a 20-year panel of German municipalities exploiting 6,800 tax changes for identication. Using event study designs and differences-in-differences models, we find that workers bear about half of the total tax burden. Administrative linked employer-employee data allow us to estimate heterogeneous firm and worker effects. Our findings highlight the importace of labor market institutions and profit-shifting opportunities for the incidence of corporate taxes on wages. Moreover, we show that low-skilled, young and female employees bear a larger share of the tax burden. This has important distributive implications.

• Item Type: Paper (Discussion Paper)
• Keywords: Business taxation; incidence; administrative data; local taxation
• Faculties: Economics > Chairs > Chair for Public Economics
• Subjects: 300 Social sciences > 330 Economics
• JEL Classification: H20, H70, J30
• Place of Publication: München
• Language: English