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Corporate Taxes and Entrepreneurs’ Income: A Credit Channel

Author

Listed:
  • Manthos D. Delis

    (Audencia Business School)

  • Emilios C. Galariotis

    (School of Production Engineering and Management)

  • Maria Iosifidi

    (Montpellier Business School)

  • Steven Ongena

    (University of Zurich - Department Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR))

Abstract

Corporate taxation can have redistributive effects on income and wealth. We hypothesize and empirically establish such an effect working via bank credit. We use a unique sample of small majority- owned firms that apply for credit, where only some firms (treated) experience a corporate tax cut. We show that after the decrease in corporate tax rates, the treated poorer business owners get easier access to credit. However, this policy also considerably increases loan amounts and decreases loan spreads for the treated richer. Ultimately, reducing the corporate tax rate predominantly increases the future income and wealth of richer business owners.

Suggested Citation

  • Manthos D. Delis & Emilios C. Galariotis & Maria Iosifidi & Steven Ongena, 2024. "Corporate Taxes and Entrepreneurs’ Income: A Credit Channel," Swiss Finance Institute Research Paper Series 24-81, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2481
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    Keywords

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    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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