Corporate Taxes and Retail Prices

60 Pages Posted: 28 Apr 2020 Last revised: 8 Jun 2022

See all articles by Scott R. Baker

Scott R. Baker

Northwestern University, Kellogg School of Management, Department of Finance; National Bureau of Economic Research (NBER)

Stephen Teng Sun

City University of Hong Kong (CityU) - Department of Accountancy

Constantine Yannelis

University of Chicago

Date Written: April 2020

Abstract

We study the impact of corporate taxes on barcode-level product prices using linked survey and administrative data. Our empirical strategy exploits the dichotomy between the location of production and the location of sales, providing estimates free from confounding demand shocks. We find significant effects of corporate taxes on prices with a net-of-tax elasticity of 0.17. The effects are larger for lower-price items and products purchased by low-income households and weaker for high-leverage firms. Approximately 31% of corporate tax incidence falls on consumers, suggesting that models used by policymakers significantly underestimate the incidence of corporate taxes on consumers.

Suggested Citation

Baker, Scott R. and Sun, Stephen Teng and Yannelis, Constantine, Corporate Taxes and Retail Prices (April 2020). NBER Working Paper No. w27058, Available at SSRN: https://ssrn.com/abstract=3586190

Scott R. Baker (Contact Author)

Northwestern University, Kellogg School of Management, Department of Finance ( email )

Evanston, IL 60208
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Stephen Teng Sun

City University of Hong Kong (CityU) - Department of Accountancy ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
China

Constantine Yannelis

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

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