Taxation and Corporate Payout Policy
AbstractThis paper presents new evidence on how corporate payout policy responds to the differential between the tax burden on dividend income and that on accruing capital gains. It describes the construction of weighted average marginal tax rate series for the period since 1929, and it suggests that the enactment of the Job Growth of Taxpayer Relief Reconciliation Act of 2003 should raise the after-tax value of dividends relative to capital gains by more than five percentage points. The impact of this change on payout depends on the elasticity of dividend payments with respect to the after-tax value of dividend income relative to capital gains. Time series estimates suggest an elasticity of more than three, and imply that the recent tax reform could ultimately increase dividends by almost twenty percent.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10321.
Date of creation: Feb 2004
Date of revision:
Note: CF PE
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Other versions of this item:
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
- H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-02-29 (All new papers)
- NEP-PBE-2004-02-29 (Public Economics)
- NEP-PUB-2004-02-29 (Public Finance)
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