Proposal: Treat profits and losses symmetrically so that the taxing authority shares in losses in the same proportion as it shares in profits. Just as companies making profits pay a share of those profits in taxes, companies make losses would receive a subsidy or negative tax from the government that would be a similar share of the losses. This proposal will reduce the volatility of the business cycle, eliminate the tax biases against small firms and new ventures, reduce distortions caused by capital market imperfections, and encourage risk taking.
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Paper provided by Boston University - Industry Studies Programme in its series Papers with number
87.
Find related papers by JEL classification: D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights D92 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Firm Choice and Growth, Investment, or Financing H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies