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Fundamental Tax ReformIssues, Choices, and Implications$
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John W. Diamond and George R. Zodrow

Print publication date: 2008

Print ISBN-13: 9780262042475

Published to MIT Press Scholarship Online: August 2013

DOI: 10.7551/mitpress/9780262042475.001.0001

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PRINTED FROM MIT PRESS SCHOLARSHIP ONLINE (www.mitpress.universitypressscholarship.com). (c) Copyright The MIT Press, 2022. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in MITSO for personal use.date: 26 January 2022

Corporation Tax Incidence: Reflections on What Is Known, Unknown, and Unknowable

Corporation Tax Incidence: Reflections on What Is Known, Unknown, and Unknowable

Chapter:
(p.282) (p.283) 6 Corporation Tax Incidence: Reflections on What Is Known, Unknown, and Unknowable
Source:
Fundamental Tax Reform
Author(s):

Arnold C. Harberger

Publisher:
The MIT Press
DOI:10.7551/mitpress/9780262042475.003.0017

This chapter examines the incidence of changes in the corporate income tax in a global economy in the context of a four-sector (tradable and non-tradable goods produced by both the corporate and the non-corporate sectors) general equilibrium model. It concludes that domestic labor often bears the full burden—or more than the full burden (overshifting)—of the corporate income tax and that a larger burden on capital understates the degree of international capital mobility as well as the degree of substitutability between domestic goods and competing imports. The chapter first considers the open economy vs. closed economy scenario for corporate income tax incidence before turning to the treatment of the corporate income tax as a “partial factor tax”.

Keywords:   corporate income tax, domestic labor, partial factor tax, capital, capital mobility, domestic goods, imports, open economy, closed economy, tax incidence

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