Working Paper

Do Higher Corporate Taxes Reduce Wages? Micro Evidence from Germany

Clemens Fuest, Andreas Peichl, Sebastian Siegloch
ifo Institute, Munich, 2017

ifo Working Paper No. 241

This paper estimates the incidence of corporate taxes on wages using a 20-year panel of German municipalities exploiting 6,800 tax changes for identication. Using event study designs and differences-in-differences models, we find that workers bear about half of the total tax burden. Administrative linked employer-employee data allow us to estimate heterogeneous firm and worker effects. Our findings highlight the importace of labor market institutions and profit-shifting opportunities for the incidence of corporate taxes on wages. Moreover, we show that low-skilled, young and female employees bear a larger share of the tax burden. This has important distributive implications.

Schlagwörter: business taxation, incidence, administrative data, local taxation
JEL Klassifikation: H200, H700, J300