Arbeitspapier
Capital income taxation and progessivity in a global economy
The increase in international capital mobility over the past two decades has put pressure on the tax treatment of corporate equity income. Corporate-level taxes distort investment flows across locations and create opportunities for tax avoidance by shifting income across jurisdictions. Outward flows of capital shift part of the burden of the corporate-level tax on equity income from capital to labor, thereby making its incidence less progressive. Individual-level taxes on corporate equity income lower the after-tax return to savings but have less distorting effects on investment location and are more likely to fall on owners of capital than workers. This logic suggests there may be both efficiency gains and increases in progressivity from shifting taxes on corporate equity income from the corporate to the shareholder level. We estimate the distributional effects of a tax reform that raises shareholder-level taxes on corporate equity income and uses the revenue to cut the corporate tax rate. We find that taxing capital gains and dividends as ordinary income (subject to a maximum 28% rate on long-term capital gains) would finance a cut in the corporate tax rate from 35% to about 26%, assuming no behavioral response. While the distributional effect depends on what one assumes about the incidence of the corporate income tax, our results suggest that even if the corporate income tax were paid entirely by capital income, the reform would make the tax system more progressive.
- Language
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Englisch
- Bibliographic citation
-
Series: Working Paper ; No. 2011-22
- Classification
-
Wirtschaft
Taxation, Subsidies, and Revenue: General
Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
Business Taxes and Subsidies including sales and value-added (VAT)
- Subject
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corporate taxation
individual taxation
Körperschaftsteuer
Steuerprogression
Steuerwirkung
Kapitalmobilität
Steuerreform
Kapitalertragsteuer
USA
- Event
-
Geistige Schöpfung
- (who)
-
Altshuler, Rosanne
Harris, Benjamin H.
Toder, Eric
- Event
-
Veröffentlichung
- (who)
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Rutgers University, Department of Economics
- (where)
-
New Brunswick, NJ
- (when)
-
2011
- Handle
- Last update
-
10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Altshuler, Rosanne
- Harris, Benjamin H.
- Toder, Eric
- Rutgers University, Department of Economics
Time of origin
- 2011
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