The JCT released a report yesterday laying out its new method for measuring corporate tax incidence, Modeling The Distribution Of Taxes On Business Income (JCX-14-13). The paper begins with a nice summary of the literature to date, and lays out the JCT's decision to assume that in the short run the incidence of corporate tax is fully on capital owners but in the long run (assumed to be reached by the end of a ten year analysis period), owners can shift 25% of the tax to domestic labor. Current Treasury practice assumes an 82/18 split. JCT explains its methodology and provides "illustrative examples", so the report is worth reading in full, but here are a few excerpts of note:
The Joint Committee staff has refrained from estimating the distribution of changes to the taxation of corporate income.... Past decisions not to estimate the distribution of taxes on corporations and passthrough entities were the result both of uncertainties among economists regarding the appropriate incidence of business taxes and to data limitations which made it impractical to distribute such taxes in the timeframe necessary to fit the legislative schedule. However, the economic literature has continued to advance. The Joint Committee staff believes that public finance economists now have a better understanding of, and can more appropriately measure, the incidence of taxes on business income. ... In addition, more detailed data and faster computing speeds help make timely completion of such distributional effects more feasible.
...The debate over the incidence of corporate income taxes is ongoing, with a range of estimates on the precise breakdown depending on the assumptions of underlying models. Nevertheless, the existing research has arrived on two clear points of consensus. One is that the burden of the corporate income tax falls largely on domestic individuals, and therefore the corporate income tax does impact the well-being of these individuals. The second is that the burden of corporate income taxes is not borne entirely by capital owners, and is instead shared between capital owners and labor with the share borne by each being the subject of ongoing debate.
...In the very short run, the incidence of business tax changes should fall entirely on the holders of the existing capital stock and bond holders. ... [I]n the long run owners of domestic capital are more easily able to escape some of the burden of the tax so business taxes are at least partially passed on to labor. ...
The new methods ... reflect the current understanding in the economics profession that domestic individuals ultimately bear the majority of the burden of these taxes. Given the general economic consensus that these taxes should be distributed to individuals, the Joint Committee staff believes that estimating the distribution is appropriate. In the short run the new method distributes 100 percent of both types of taxes to owners of capital. In the long run it distributes 75 percent of corporate income taxes and 95 percent of the taxes attributable to passthrough business income to owners of capital.
A portion of capital’s share of the corporate tax burden is borne by international capital owners, so in both the short run and the long run the distribution of tax burdens borne by domestic owners of capital is less than the burden borne by all capital owners. The portion of the corporate income tax burden borne by foreign capital owners is not distributed to domestic individuals on tax distribution tables. The remainder of the tax burden that is not distributed to foreign and domestic capital owners is distributed to labor, reflecting the compensation adjustment that results from corporate income taxes reducing the after-tax revenue that each worker generates for his firm.
Given no definitive economic literature on the duration of the short run, the Joint Committee staff generally assumes that the long run is reached by the end of the 10-year budget window. These distributions between capital and labor reflect the middle of the range of estimates for distributing business taxes in the economic literature. The Joint Committee staff will use the updated distribution methods in this report to estimate tax distributions for all future estimates of the distribution of Federal income taxes. The Joint Committee staff will continue to evaluate and refine this approach to be consistent with new research findings as they arise.