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Does the Investment Interest Limitation Explain the Existence of Dividends?

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  • Daniel R. Feenberg

Abstract

Miller and Scholes show that under certain conditions the Federal Income tax taxes dividend income at a rate no higher than the rate on capital gains. Tabulations of actual 1977 tax returns show that the special circumstances under which this can occur apply to less than 3% of dividend income and no significant role can be ascribed to their result in the determination of corporate dividend policy.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0530.

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Date of creation: Feb 1982
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Handle: RePEc:nbr:nberwo:0530

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Cited by:
  1. James M. Poterba & Lawrence A. Summers, 1984. "New Evidence that Taxes Affect the Valuation of Dividends," Working papers 338, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. James M. Poterba, 1990. "Tax Reform and the Market For Tax-Exempt Debt," NBER Working Papers 2900, National Bureau of Economic Research, Inc.
  3. Robert L. McDonald & Naomi Soderstrom, 1986. "Dividend and Share Changes: Is There a Financing Hierarchy?," NBER Working Papers 2029, National Bureau of Economic Research, Inc.
  4. Mihir A. Desai & C. Fritz Foley & James R. Hines Jr., 2002. "Dividend Policy inside the Firm," NBER Working Papers 8698, National Bureau of Economic Research, Inc.
  5. James M. Poterba, 1986. "How Burdensome Are Capital Gains Taxes?," Working papers 410, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. James M. Poterba & Lawrence H. Summers, 1985. "The Economic Effects of Dividend Taxation," NBER Working Papers 1353, National Bureau of Economic Research, Inc.
  7. Randall Morck, 2003. "Why Some Double Taxation Might Make Sense: The Special Case of Inter-corporate Dividends," NBER Working Papers 9651, National Bureau of Economic Research, Inc.
  8. James M. Poterba, 1984. "Expected Future Tax Policy and Tax Exempt Bond Yields," Working papers 350, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Joseph E. Stiglitz, 1988. "The General Theory of Tax Avoidance," NBER Working Papers 1868, National Bureau of Economic Research, Inc.

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