Quantitative Economics

Journal Of The Econometric Society

Edited by: Stéphane Bonhomme • Print ISSN: 1759-7323 • Online ISSN: 1759-7331

Quantitative Economics: Jan, 2022, Volume 13, Issue 1

Financing corporate tax cuts with shareholder taxes

Alexis Anagnostopoulos, Orhan Erem Atesagaoglu, Eva Cárceles‐Poveda

We study the aggregate and distributional consequences of replacing corporate profit taxes with shareholder taxes, namely taxes on dividends and capital gains, in a setting with incomplete markets and heterogeneity at both the household and the firm level. The reform yields distributional gains with a large majority of households benefiting. Moreover, if dividend and capital gains are taxed at the same rate, the reform is also efficiency‐enhancing and the implied optimal corporate income tax rate is zero. In contrast, an asymmetric tax treatment of dividend and capital gains induces a trade‐off between efficiency and distributional concerns that is optimally resolved at a positive optimal corporate tax rate, implying double taxation.

Optimal corporate taxes double taxation heterogeneity misallocation E6

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Supplemental Material

Supplement to "Financing corporate tax cuts with shareholder taxes"

Supplement to "Financing corporate tax cuts with shareholder taxes"

Supplement to "Financing corporate tax cuts with shareholder taxes"

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