Ota Paper 101: A Review Of The Evidence On The Incidence Of The Corporate Income Tax - William M. Gentry (Office Of Tax Analysis, Us Department Of The Treasury) Page 26
ADVERTISEMENT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42The underpinnings of ADM’s empirical work suggest an important caveat to this claim
that shareholders cannot shift the corporate tax. They focus on the possibility that wages are
determined through bargaining between the firm and workers. Thus, wages are not merely
determined by the marginal product of labor, as is assumed by the general equilibrium models.
By changing the amount of money over which firms and workers bargain, the corporate tax can
affect the incomes of workers even if it does not change the amount of capital used by the firm or
the output prices charged by the firm.
III.B.2. Labor Mobility
Randolph’s open economy general equilibrium model makes the typical assumption that
capital moves across borders but labor stays in the same location. Unsurprisingly, such a model
results in the less mobile factor bearing the burden of interjurisdictional differences in taxation of
the mobile factor. Naturally, as one increases the mobility of labor, one would expect that it
becomes less likely that a tax on mobile capital will be shifted onto labor.
For the federal-level corporate tax in the U.S., this assumption seems quite natural since
15
migration flows are relatively modest.
However, since the empirical evidence discussed above
relies on a wide range of countries, the assumption of immobile labor may not be the best
assumption with which to interpret their results. Specifically, Felix relies fairly heavily on
differences in corporate tax rates across European countries, which tend to have more
opportunities for cross-border migration than U.S. labor markets. Furthermore, recall that
Hassett and Mathur find evidence that high corporate tax rates in neighboring countries are
15
In contrast, if one were interested in the tax incidence of state-level taxes within the United States, assuming that
labor is immobile would probably be unpalatable. Consistent with labor mobility affecting wages, Feldstein and
Wrobel (1998) find that wages respond to interstate differences in taxation (albeit personal taxes rather than
corporate taxes).
23
ADVERTISEMENT
0 votes
Related Articles
Related forms
Instructions For Form Co-411 - C Corporate Income Tax Return - Vermont Department Of Taxes
Financial
Form It-20x - Amended Corporation Income Tax Return - Indiana Department Of Revenue - Yellow
Financial
Corporation Income Tax Electronic Filing Waiver Request Form - Virginia Department Of Taxation
Financial
Corporation Income Tax Electronic Filing Waiver Request Form - Virginia Department Of Taxation - 2015
Financial
Related Categories
Parent category: Legal