Clemens Fuest, Andreas Peichl, Sebastian Siegloch, 10 October 2017

Economists tend to think that the corporate tax burden is shared between labour and capital, but even among researchers in the field there is substantial disagreement over how much of the burden is shifted to workers. This column exploits variations in local business tax rates in Germany to identify the corporate tax incidence on wages. On average, more than half of the corporate tax burden is passed onto workers, implying a reduced overall progressivity of the German tax system.