Corporate Taxes and Economic Inequality: A Credit Channel

Delis, Manthos and Galariotis, Emilios and Iosifidi, Maria (2023): Corporate Taxes and Economic Inequality: A Credit Channel.

Abstract

Corporate taxation can have redistributive effects on income and wealth. We hypothesize and empirically establish such an effect working via bank credit. Using a unique sample of majority-owned firms that apply for credit, we show that after a decrease in corporate tax rates the relative-ly poor get easier access to credit. However, this policy also considerably increases loan amounts and decreases loan spreads for the relatively rich. Ultimately, reducing the corporate tax rate pre-dominantly increases the future income and wealth of relatively rich business owners.

• Item Type: MPRA Paper
• Language: English
• Keywords: Corporate taxes; Economic inequality; Bank credit; Credit score
• Subjects: D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement; G - Financial Economics > G2 - Financial Institutions and Services > G20 - General; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H25 - Business Taxes and Subsidies

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