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This paper assesses the effects of corporate tax cuts on small firms
and their workers. Following a reform in Quebec, Canada, firms
receiving tax cuts expand and their workers' earnings increase com-
pared to workers and firms without tax cuts. We estimate that
overall workers bear 35 percent of the tax burden, with larger inci-
dence falling on those with ownership in the companies they work
through increased profits. Additionally, workers across each ter-
cile of the within-firm earnings distribution beneffit from tax cuts,
possibly because fair-wage concerns matter when after-tax profits
rise due to close interactions among workers in small corporate
environments.
