The bottom line: corporate tax should be felt by other forms of capital. That's the standard assumption. CBO makes it, Auten-Splinter make it, Piketty-Saez-Zucman make it. Who does not? Saez-Zucman (2019) do not.
Conversation
Aside, and I'll promise I'll chill again. Would they be allowed to do in a refereed paper? I very seriously doubt it. Not without very strong arguments. Done.
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Is it reasonable to assume that other capital bears the burden of the corporate tax? I'm willing to debate, open to discussion. But they don't push this. Instead, they argue here gabriel-zucman.eu/files/SaezZucm that you should do things differently for reforms than for current burden
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It's new, I haven't thought much about it, worth reading, but this is at the very least controversial. That's the kind of things to debate academically, not throw as a grenade in public. It is about definitions not economics. It is also definitely problematic...
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What does that mean that over 50 year horizon of these types of exercises one should rely on statutory incidence? We teach in econ 101 that statutory and economic incidence are not the same.
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Anyway, by all means do consider alternative assumptions. In this particular case, the whole story is the new assumption. There is no major decline in progressivity absent that. If you think it's a fact, you have to think that incidence of corporate tax is solely on shareholders
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As another aside, note that even the Piketty-Saez-Zucman assumption was very strong. In particular, no burden was put on workers. Higher corporate tax, possibly lower wages.
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Auten and Splinter and CBO put part of the burden on wages. Good evidence for that, see for example recent papers by , and Siegloch aeaweb.org/articles?id=10 or and
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Why does it matter? If corporate tax is only on shareholders, its burden is concentrated at the top. Changes in corporate tax revenue translate into changes in the rate at the top. That's the trend in Saez-Zucman. That's what drives 2018 after corporate tax cut.
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Everybody else puts part of the burden on other capital and/or a bit on workers (not in PSZ though). That makes changes in corporate revenue spread out more thinly over the distribution. This is the difference even between PSZ QJE and Saez-Zucman. That's the whole difference.
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The one remaining point is capital gains. They smooth them. That makes the series less volatile. It breaks national accounts (that has been adamant you should not do when applied to transfers). It seems it doesn't change the big picture.
But for completeness and direction for an improvement: capital gains accumulate over time. You should spread them over accrual period. That's not just a correction for the year when realized. The 3% assumption is ad hoc. Maybe palatable now but not when inflation was high
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Final aside and the last time I am not chill. What I did not like about the whole thing. article and editorial were out, details of what these figures represent were not. It wouldn't be difficult to say: we changed corporate tax incidence assumption, but it was not said
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I can understand publisher constraints. I don't see though why technical appendix can't be released to researchers. Clearly, things were released to journalists. And if there are constraints, then perhaps one should wait with publicity until things are in the open. /end (Chilled)
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