At a Loss: The Real and Reporting Elasticity of Corporate Taxable Income
68 Pages Posted: 20 May 2015 Last revised: 15 Jun 2017
Date Written: June 14, 2017
We use administrative data on the population of corporations to investigate the distortion of corporate taxes on private firms, which account for 99% of all corporations. In response to a 9% increase in corporate tax rates, firms decrease income by 8.9%--5.5% due to reporting differences (e.g., tax shields) and 3.4% due to real differences (e.g., investment). We find differences in agency costs, investment frictions, and tax aggressiveness between firms using cash and accrual accounting and among small and large firms. Our estimates suggest that lowering the corporate tax rate from 35% to 25% would increase firm value by 16%.
Keywords: Effective Incidence, Corporate Tax
JEL Classification: H22, H21, H25, H32, G38
Suggested Citation: Suggested Citation