Capitalists, Workers and Landlords: A Comprehensive Analysis of Corporate Tax Incidence [Policy Paper]

with David Gstrein, Florian Neumeier and Andreas Peichl 

This paper presents novel estimates of the incidence of corporate taxes that, for the first time, account for commercial real estate in addition to residential landowners, firm owners, and workers. We combine unique real estate data covering over 32 million properties with administrative data on wages and profits in Germany and leverage over 17,000 local business tax changes for our empirical analysis. Our estimates indicate that a one percentage point increase in local business taxes reduces commercial real estate prices by 2%, while residential real estate prices decline by 1%. Wages decline by approximately 1%, and profits decline by about 2%. These results are robust to the inclusion of a large set of controls and to estimators that account for heterogeneous treatment effects. We use the reduced-form estimates to update current incidence measures using a spatial-equilibrium framework and find that commercial landowners bear a significant share of the tax burden (≈ 15%) in the medium-run, while workers (≈ 14%) and residential landowners (≈ 12%) bear slighly smaller burdens. Firm owners bear the largest share of the burden (≈ 60%). Moreover, our framework puts the existing literature into perspective: we not only derive new incidence estimates but also reconcile divergent findings and clarify the mechanisms and modeling choices responsible for differences across studies.