Discussion paper
DP18762 Corporate Taxes and Economic Inequality: A Credit Channel
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 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 relatively poor business owners get easier access to credit. However, this policy also considerably increases loan amounts and de-creases loan spreads for the treated relatively rich. Ultimately, reducing the corporate tax rate pre-dominantly increases the future income and wealth of relatively rich business owners.
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