Most economists agree that the burden of the corporate income tax falls on labor to some extent, but there is disagreement over the degree.While Treasury economists conclude that 82 percent of the corporate tax falls on capital and 18 percent on labor, all assumptions may be called into question when dealing with any specific tax reform proposal.
For example, a change in depreciation allowances is mainly going to affect manufacturing companies, whereas a change in the taxes on foreign-source income will have an impact only on multinationals.
And Oxford University economist, Li Liu and a Rutgers economist, Rosanne Altshuler, argue that labor bears most of the burden of the corporate tax. They empirically examined wages among industries and concluded that labor bears about 60 percent of the corporate tax burden. That is, a $1 increase in corporate taxes will reduce wages by about 60 cents.
So, the incidence of corporate income tax remains, for the moment, an open question.
