American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Impacts of Corporate Tax Cuts on Firms and Workers: Evidence from Small Businesses
American Economic Journal: Economic Policy
(pp. 208–44)
Abstract
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 compared to workers and firms without tax cuts. We estimate that overall workers bear 35 percent of the tax burden, with larger incidence falling on those with ownership in the companies they work at, through increased profits. Additionally, workers across each tercile of the within-firm earnings distribution benefit from tax cuts, possibly because fair-wage concerns matter when after-tax profits rise due to close interactions among workers in small corporate environments.Citation
Duan, Yige, and Terry S. Moon. 2026. "Impacts of Corporate Tax Cuts on Firms and Workers: Evidence from Small Businesses." American Economic Journal: Economic Policy 18 (4): 208–44. DOI: 10.1257/pol.20240813Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- H22 Taxation and Subsidies: Incidence
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- J31 Wage Level and Structure; Wage Differentials
- L25 Firm Performance: Size, Diversification, and Scope