American Economic Journal Economic Policy· 2026Q1
Impacts of Corporate Tax Cuts on Firms and Workers: Evidence from Small Businesses
- 2citations
- Q1SCImago
- 2026year
Short summary
A 2014 Quebec tax cut led to a significant increase in small firms' profits and worker earnings, with workers bearing an estimated 36% of the tax burden, particularly through increased profits for owner-employees.
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Key points
- Small firms in Quebec saw increased profits and expansion following a 2014 tax cut.
- Worker earnings increased significantly after the tax cut.
- Workers are estimated to bear approximately 36% of the corporate tax cut burden.
- Owner-employees benefited most from increased profits, but all workers across the earnings distribution saw gains.
AI-generated from the title and abstract; the full text is not read.
Abstract
This paper assesses the effects of corporate tax cuts on small firms and their workers. Following a 2014 reform in Quebec, Canada, firms which receive tax cuts expand and become more profitable, and their workers’ earnings increase significantly. We estimate that overall workers bear about 36 percent of the tax burden, with the largest incidence falling on those with ownership in the companies they work through increased profits. Additionally, workers across the entire within-firm earnings distribution benefit from the tax cuts, possibly because fair-wage concerns matter when after-tax profits rise due to close interactions among workers in small corporate environments.
The authors' abstract, as published at the source. American Economic Journal Economic Policy, 2026 · DOI ↗
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