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Corporate Taxes and Entrepreneurs’ Income: A Credit Channel

Author

Listed:
  • Delis, Manthos
  • Galariotis, Emilios
  • Iosifidi, Maria
  • Ongena, Steven

Abstract

Corporate taxation can have redistributive effects on income and wealth. We hypothesize and empirically establish such an effect working via bank credit. We use a unique sample of small majority-owned firms that apply for credit, where only some firms (treated) experience a corporate tax cut. We show that after the decrease in corporate tax rates, the treated poorer business owners get easier access to credit. However, this policy also considerably increases loan amounts and de-creases loan spreads for the treated richer. Ultimately, reducing the corporate tax rate predominantly increases the future income and wealth of richer business owners.

Suggested Citation

  • Delis, Manthos & Galariotis, Emilios & Iosifidi, Maria & Ongena, Steven, 2024. "Corporate Taxes and Entrepreneurs’ Income: A Credit Channel," CEPR Discussion Papers 18762, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18762
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    More about this item

    Keywords

    Bank credit; Economic inequality; Corporate taxes;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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