The Effect of Tax Rates and Tax Bases on Corporate Tax Revenues: Estimates with New Measures of the Corporate Tax Base

57 Pages Posted: 6 Oct 2012

See all articles by Laura Kawano

Laura Kawano

University of Michigan at Ann Arbor

Joel B. Slemrod

University of Michigan, Stephen M. Ross School of Business; National Bureau of Economic Research (NBER)

Date Written: October 2012

Abstract

Several recent analyses have suggested that the revenue-maximizing corporate tax rate resides in the low-30's. We challenge this result by re-examining this relationship using a new compilation of changes in corporate tax base definitions for OECD countries between 1980 and 2004. By considering tax base changes in addition to tax rate changes, we can address the estimation bias that applies to tax rates absent their consideration. We find that the relationship between corporate tax rates and corporate tax revenues is tenuous. The large behavioral response to corporate tax rates implied in the literature does not obtain when accounting for persistent differences in tax policy and business environments across countries.

Suggested Citation

Kawano, Laura and Slemrod, Joel B., The Effect of Tax Rates and Tax Bases on Corporate Tax Revenues: Estimates with New Measures of the Corporate Tax Base (October 2012). NBER Working Paper No. w18440. Available at SSRN: https://ssrn.com/abstract=2157884

Laura Kawano (Contact Author)

University of Michigan at Ann Arbor ( email )

Joel B. Slemrod

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
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Ann Arbor, MI 48109-1234
United States
734-936-3914 (Phone)
734-763-4032 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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