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

Abstract

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: https://ssrn.com/abstract=359311

Casey B. Mulligan (Contact Author)

University of Chicago ( email )

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