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Author: James M. Poterba Publisher: ISBN: Category : Capital investments Languages : en Pages : 66
Book Description
Taxes on corporate distributions have traditionally been regarded as a "double tax" on corporate income. This view implies that while the total effective tax rate on corporate source income affects real economic decisions, the distribution of this tax burden between the shareholders and the corporation is irrelevant. Recent research has suggested an alter- native to this traditional view. One explanation of why firms in the U.S. pay dividends in spite of the heavy tax liabilities associated with this form of distribution is that the stock market capitalizes the tax payments associated with corporate distributions. This capitalization leaves investors indifferent at the margin between corporations paying our dividends and retaining earnings. This alternative view holds that while changes in the dividend tax rate will affect shareholder wealth, they will have no impact on corporate investment decisions. This paper develops econometric tests which distinguish between these two views of dividend taxation. By extending Tobin's "q" theory of investment to incorporate taxes at both the corporate and personal levels, the implications of each view for corporate investment decisions can be derived. The competing views may be tested by comparing the performance of investment equations estimates under each theory's predict ions. British time series data are particularly appropriate for testing hypotheses about dividend taxes because of the substantial postwar variation in effective tax rates on corporate distributions. The econometric results suggest that dividend taxes have important effects on investment decisions
Author: James M. Poterba Publisher: ISBN: Category : Capital investments Languages : en Pages : 66
Book Description
Taxes on corporate distributions have traditionally been regarded as a "double tax" on corporate income. This view implies that while the total effective tax rate on corporate source income affects real economic decisions, the distribution of this tax burden between the shareholders and the corporation is irrelevant. Recent research has suggested an alter- native to this traditional view. One explanation of why firms in the U.S. pay dividends in spite of the heavy tax liabilities associated with this form of distribution is that the stock market capitalizes the tax payments associated with corporate distributions. This capitalization leaves investors indifferent at the margin between corporations paying our dividends and retaining earnings. This alternative view holds that while changes in the dividend tax rate will affect shareholder wealth, they will have no impact on corporate investment decisions. This paper develops econometric tests which distinguish between these two views of dividend taxation. By extending Tobin's "q" theory of investment to incorporate taxes at both the corporate and personal levels, the implications of each view for corporate investment decisions can be derived. The competing views may be tested by comparing the performance of investment equations estimates under each theory's predict ions. British time series data are particularly appropriate for testing hypotheses about dividend taxes because of the substantial postwar variation in effective tax rates on corporate distributions. The econometric results suggest that dividend taxes have important effects on investment decisions
Author: James M. Poterba Publisher: ISBN: Category : Dividends Languages : en Pages : 102
Book Description
This paper tests several competing hypotheses about the economic effects of dividend taxation. It employs British data on security returns, dividend payout rates, and corporate investment, because unlike the United States, Britain has experienced several major dividend tax reforms in the last three decades. These tax changes provide an ideal natural experiment for analyzing the effects of dividend taxes. We compare three different views of how dividend taxes affect decisions by firms and their shareholders. We reject the"tax capitalization" view that dividend taxes are non-distortionary lump sum taxes on the owners of corporate capital. We also reject the hypothes is that firms pay dividends because marginal investors are effectively untaxed. We find that the traditional view that dividend taxes constitute a "double-tax" on corporate capital income is most consistent with our empirical evidence. Our results suggest that dividend taxes reduce corporate investment and exacerbate distortions in the intersectoral and intertemporal allocation of capital
Author: David A. Weisbach Publisher: ISBN: Category : Capital gains tax Languages : en Pages : 28
Book Description
This study examines the interaction of dividend taxes and capital gains taxes on the sale of stock. Using a model of the new view of dividend taxation modified to incorporate realization-based capital gains and losses on stock, it shows that there are two interactions that effect the timing of dividend payments. First, there is an incentive to distribute dividends prior to realizing gain on a stock sale. Second, the timing of dividends is affected by considerations parallel to the standard lock-in effects for sales. Finally the paper shows that if there are tax clienteles, the new view no longer holds. The conclusions have a number of policy implications and also may affect empirical strategies used to identify the new view.
Author: Matteo Ghilardi Publisher: International Monetary Fund ISBN: Category : Business & Economics Languages : en Pages : 35
Book Description
We analyze the effects of dividend taxation in a general equilibrium business cycle model with an occasionally-binding investment credit limit. Permanent dividend tax reforms distort capital investment decisions in the binding long-run equilibrium, but are neutral otherwise. Temporary unexpected tax cuts stimulate shortterm real activity in the credit-constrained economy, yet produce contractionary macroeconomic outcomes in the slack regime. The occasionally-binding constraint reconciles the `traditional' and `new' views of dividend taxation, and highlights the importance of measuring the firm's initial borrowing position before enacting tax reforms. Finally, permanently lower dividend taxes dampen financial business cycles, and help to explain macroeconomic asymmetries.
Author: United States. Congress. Senate. Committee on Commerce, Science, and Transportation. Subcommittee on Consumer Affairs and Product Safety Publisher: ISBN: Category : Business & Economics Languages : en Pages : 36
Author: James M. Poterba
Author: James M. Poterba
Author: James M. Poterba
Author: David A. Weisbach
Author: Annette Alstadsaeter
Author: Annette Alstadsæter
Author: Matteo Ghilardi
Author: Annette Alstadsaeter
Author: John Karl Scholz
Author: Kenneth James McKenzie
Author: United States. Congress. Senate. Committee on Commerce, Science, and Transportation. Subcommittee on Consumer Affairs and Product Safety