Corporate Income Tax, Legal Form of Organization, and Employment

• 成果类型: Article
• 署名作者: Chen, Daphne; Qi, Shi; Schlagenhauf, Don
• 署名单位: William & Mary; Federal Reserve System - USA; Federal Reserve Bank - St. Louis
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MACROECONOMICS
• ISSN/ISSBN: 1945-7707
• DOI: 10.1257/mac.20140103
• 发表日期: 2018
• 页码: 270-304
• 关键词: Financial intermediation; taxable income; entrepreneurship; misallocation; distortions; elasticity; taxation; CHOICE

摘要

A dynamic stochastic occupational choice model with heterogeneous agents is developed to evaluate the impact of a corporate income tax reduction on employment. In this framework, the key margin is the endogenous entrepreneurial choice of the legal form of organization. A reduction in the corporate income tax burden encourages adoption of the C corporation legal form, which reduces capital constraints on firms. Improved capital reallocation increases the overall productive efficiency in the economy and therefore expands the labor market. Relative to the benchmark economy, a corporate income tax cut can reduce the nonemployment rate by up to 7 percent.