An empirical analysis of the incidence of the corporate income tax in the manufacturing sector.

摘要

The corporate income tax is levied on earnings at the corporate level and shareholders pay taxes again on these earnings when they are paid out as dividends. This double taxation has been a concern of policy makers and the effect on the economy has been analyzed and discussed by researchers in many disciplines. However, the questions concerning double taxation and economic effect cannot be answered accurately without an understanding of who really bears the burden of the corporate income tax. Corporations are legal entities and as such can perform the act of paying the tax, but the burden of the tax must fall on individuals within the economy. The natural assumption would be that the owners of the corporation, shareholders, bear the burden of the corporate income tax. The possibility exists that this tax is instead passed on to consumers in the form of higher prices or to labor in the form of lower wages. Little empirical work has been done to determine the incidence of the corporate income tax, or in other words, who bears the burden of the tax.;This dissertation uses financial statement data from Standard and Poor's 1996 Compustat Annual Data tapes for firms in the manufacturing sector to measure the effect of the corporate income tax on the three players--shareholders, consumers, and labor. The results suggest that shareholders do bear some of the burden of the income tax, but there is evidence that some of the incidence falls on others.;Simple ordinary least squares regression is used for models representing each of the three players for individual firms over time and the coefficients of the tax variable are averaged. The results show a significantly negative relationship between returns to shareholders and the tax, indicating returns decrease when the tax increases. The results also show a significant positive relationship between change in gross profit ratios and the tax, indicating prices are increased when the tax increases. Thus, the conclusion can be made that the study provides evidence that the burden of the tax is borne by at least two players, shareholders and consumers.