To Cut or Not to Cut? On the Impact of Corporate Taxes on Employment and Income / Alexander Ljungqvist, Michael Smolyansky.

Format:

Book

Author/Creator:

Ljungqvist, Alexander.

Contributor:

National Bureau of Economic Research.

Smolyansky, Michael.

Series:

Working Paper Series (National Bureau of Economic Research) no. w20753.

NBER working paper series no. w20753

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

To Cut or Not to Cut?

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2014.

Summary:

Do corporate tax increases destroy jobs? And do corporate tax cuts boost employment? Answering these questions has proved empirically challenging. We propose an identification strategy that exploits variation in corporate income tax rates across U.S. states. Comparing contiguous counties straddling state borders over the period 1970 to 2010, we find that increases in corporate tax rates lead to significant reductions in employment and wage income, while corporate tax cuts only boost economic activity if implemented during recessions. Our spatial-discontinuity approach permits a causal interpretation of these findings by both establishing a plausible counterfactual and overcoming biases resulting from the fact that tax changes are often prompted by changes in economic conditions.

Notes:

Print version record

December 2014.