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The Efficiency Cost of Asset Taxation in the U.S. after Accounting for Intangible Assets

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  • Estelle P. Dauchy

    ()
    (New Economic School)

Abstract

This paper comprehensively calculates corporate intangible assets by industry from 1998 to 2009, and evaluates the impact of expensing intangible assets on the cost of capital, the METR, and the welfare cost of inter-asset taxation, under current law and alternative tax policy including recent policy proposals. It also estimates the welfare cost of `leveling the playing field’. I find that capitalizing intangible assets can reduce the METR by up to 28 percentage points in finance. The intangible-inclusive welfare cost of inter-asset taxation is twice as large as a conventional measure under current law, and can be much larger than the tax revenue loss of alternative policy. Leveling the playing field may reduce or increase the deadweight loss of inter-asset taxation. The results provide a valuable input for research estimating the impact of investment tax incentives.

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Bibliographic Info

Paper provided by Center for Economic and Financial Research (CEFIR) in its series Working Papers with number w0199.

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Length: 67 pages
Date of creation: Mar 2013
Date of revision:
Handle: RePEc:cfr:cefirw:w0199

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Keywords: Intangible Assets; Cost of Capital; Welfare Cost; Inter-asset Taxation; Bonus Depreciation;

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References

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  1. Christopher House & Matthew D. Shapiro, 2006. "Temporary Investment Tax Incentives: Theory with Evidence from Bonus Depreciation," NBER Working Papers 12514, National Bureau of Economic Research, Inc.
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  14. M. Ishaq Nadiri & Ingmar R. Prucha, 1993. "Estimation of the Depreciation Rate of Physical and R&D Capital in the U.S. Total Manufacturing Sector," NBER Working Papers 4591, National Bureau of Economic Research, Inc.
  15. Mauro Giorgio Marrano & Jonathan Haskel & Gavin Wallis, 2007. "What Happened to the Knowledge Economy? ICT, Intangible Investment and Britain's Productivity Record Revisited," Working Papers 603, Queen Mary, University of London, School of Economics and Finance.
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Cited by:
  1. Estelle P. Dauchy & Sebastien Bradley & Makoto Hasegawa, 2013. "Investor Valuations of Japan's Adoption of a Territorial Tax Regime: Quantifying the Direct and Competitive Effects of International Tax Reform," Working Papers w0201, Center for Economic and Financial Research (CEFIR).

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