An increase in apartment construction would increase competition for tenants, reducing rents or causing them to rise more slowly. Thus, some of any net business tax reduction would be passed from firm owners to employees and customers. This would have the effect of changing some tax cuts to business into effective tax cuts to individuals. Businesses would continue to pay lower taxes, but higher wages paid and lower prices received would offset some of the tax cut. Individuals would continue to pay higher taxes, but higher wages or lower prices would offset some of these tax payments.
Local governments have such shifts in mind when they grant tax abatements.
Tax abatements are granted in order to encourage firms to locate and expand in a community. Local governments grant abatements not for the purpose of raising profits for firms, however, but to encourage economic activity in their communities. This activity is expected to increase job opportunities for employees, and purchasing opportunities for consumers. The tax breaks to the firms are at least partially passed on to community members in better, more plentiful jobs and better, more plentiful consumer choices. The share of business taxes that are shifted to customers and employees is uncertain.