The Consequences of Income Tax Subsidies: Evidence from the Restaurant Industry

ABSTRACT I examine the consequences of implementation 45B Credit, an employer payroll tax subsidy (administered as income credit) intended to encourage honest wage reporting for tipped employees. find evidence suggesting that employees increased following Credit. also this credit influenced investment and economic performance. Specifically, Credit firms experienced greater profitability growth compared non-45B restaurant firms. Overall, these findings suggest had important unintended consequences. This study provides insights into relation between firms, industries, subsidies, which should be useful lawmakers when reviewing net benefits other subsidies in future. Data Availability: used from publicly available sources.