Advanced Search
MyIDEAS: Login

Income Taxation and Business Incorporation: Evidence from the Early Twentieth Century

Contents:

Author Info

  • Li Liu

    ()
    (Centre for Business Taxation, University of Oxford)

Registered author(s):

Abstract

If the corporate income tax is set at a different rate from non-corporate income tax, it can play an important role in a firm's choice of organizational form. The impact and interdependency of income tax incentives are crucial factors to take into account when designing efficient tax policies. In this paper I exploit the substantial variation in income taxes across U.S. states in the early twentieth century to estimate these sensitivities. The potential endogeneity of state taxes is addressed using an IV approach. The results demonstrate that the relative taxation of corporate to personal income has a significant impact on the corporate share of economic activities. Raising the entrepreneur's tax cost of incorporation by 10% decreases the mean corporate share of economic activities by about 11-18%. In addition, higher personal tax rates may affect the share of corporate activities through tax evasion and tax progressivity.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sbs.ox.ac.uk/sites/default/files/Business_Taxation/Docs/WP1205.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Oxford University Centre for Business Taxation in its series Working Papers with number 1205.

as in new window
Length:
Date of creation: 2012
Date of revision:
Handle: RePEc:btx:wpaper:1205

Contact details of provider:
Postal: Park End Street, Oxford OX1 1HP UK
Phone: +44 (0)1865 288800
Fax: +44 (0)1865 288805
Web page: http://www.sbs.ox.ac.uk/ideas-impact/tax/
More information through EDIRC

Related research

Keywords: Corporate income tax; Personal income tax; Incorporation; Early Twentieth Century;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Da Rin, M. & Di Giacomo, M. & Sembenelli, A., 2010. "Entrepreneurship, Firm Entry, and the Taxation of Corporate Income: Evidence from Europe," Discussion Paper 2010-026, Tilburg University, Tilburg Law and Economic Center.
  2. Peter Egger & Christian Keuschnigg & Hannes Winner, 2008. "Incorporation and Taxation: Theory and Firm-level Evidence," University of St. Gallen Department of Economics working paper series 2008 2008-20, Department of Economics, University of St. Gallen.
  3. Ruud de Mooij & G. Nicod, 2008. "Corporate tax policy and incorporation in the EU," CPB Discussion Paper 97, CPB Netherlands Bureau for Economic Policy Analysis.
  4. Timothy Guinnane & Ron Harris & Naomi R. Lamoreaux & Jean-Laurent Rosenthal, 2007. "Putting the Corporation in its Place," NBER Working Papers 13109, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. On the effects of income tax to the private businesses
    by bearodr in NEP-HIS blog on 2012-11-08 12:23:20
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Mazhar Waseem, 2013. "Taxes, Informality and Income Shifting: Evidence from a Recent Pakistani Tax Reform," 2013 Papers pwa641, Job Market Papers.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:btx:wpaper:1205. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Li Liu).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.