Capital Tax Incidence: First Impressions from the Time Series

27 Pages Posted: 13 Dec 2002 Last revised: 31 Oct 2010

See all articles by Casey B. Mulligan

Casey B. Mulligan

University of Chicago; National Bureau of Economic Research (NBER)

Date Written: December 2002


Aggregate time series data are used to calculate the incidence of capital taxes. Part of the analysis is borrowed from the literature on sales tax incidence, comparing pre-tax interest rates with tax rates. The other part compares tax rates with after-tax interest rates, which are measured separately and independently from pre-tax interest rates. I find a positive correlation between capital tax rates and pre-tax interest rates, and little correlation between after-tax interest rates and tax rates, but both of these findings seem to derive in part from the effect of the business cycle on tax rate measures, as opposed to a shifting of capital taxes. The empirical findings are consistent with significant capital tax shifting in the long run, little shifting in the short run, and clearly rule out over-shifting.

Suggested Citation

Mulligan, Casey B., Capital Tax Incidence: First Impressions from the Time Series (December 2002). NBER Working Paper No. w9374, Available at SSRN:

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