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Corporate Taxes and Economic Inequality: A Credit Channel

Author

Listed:
  • Manthos D. Delis

    (Audencia Business School)

  • Emilios C. Galariotis

    (Audencia Business School)

  • Maria Iosifidi

    (Montpellier Business School)

  • Steven Ongena

    (University of Zurich, SFI, KU Leuven, NTNU Business School, CEPR)

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 relatively 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 predominantly increases the future income and wealth of relatively rich business owners.

Suggested Citation

  • Manthos D. Delis & Emilios C. Galariotis & Maria Iosifidi & Steven Ongena, 2023. "Corporate Taxes and Economic Inequality: A Credit Channel," Swiss Finance Institute Research Paper Series 23-29, Swiss Finance Institute, revised May 2023.
    • Handle: RePEc:chf:rpseri:rp2329
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    More about this item

    Keywords

    Corporate taxes; Economic inequality; Bank credit; Credit score;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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