Monday, August 03, 2009

Corporate Taxes and Wages

The Tax Foundation has a new report out today looking at corporate income tax rates and their impact on wages. The pdf of the study is here. Here's the gist:

"Specifically, a one percent drop in the average tax rate leads to a 0.014 percent rise in real wages five years later. In dollar terms, that means wages rise $2.50 for every one dollar reduction in state-local corporate income taxes.


Altogether, this body of work draws into question the conventional wisdom that corporate taxes add to the progressivity of the tax system. If instead of burdening capital, the corporate tax primarily burdens labor, as this study finds, then the corporate income tax does not add to the progressivity of the tax system."

I added the emphasis. The Tax Foundation is a great place to find tax research on the impact of taxes at the state level.

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