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The Significance of Tax Law Asymmetries: An Empirical Investigation

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Author Info
Rosanne Altshuler
Alan J. Auerbach

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Abstract

This study uses tax return data for U.S. nonfinancial corporations for the period 1971-82 to estimate the importance of restrictions on the ability of firms to use tax credits and to obtain refunds for tax losses. Our results suggest that the incidence of such unused tax benefits increased substantially during the early 1980s, though we do not find these increases attributable to increased investment incentives during that period. Using estimates of a three-state (taxable, not taxable, partially taxable) transition probability model, we calculate the effective tax rates on various types of investments undertaken by firms differing with respect to tax status. We confirm previous findings about the marginal tax rate on interest payments, and that it is important to distinguish current tax payments from marginal tax rates in estimating the incentive to invest.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2279.

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Date of creation: Apr 1990
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Handle: RePEc:nbr:nberwo:2279

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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.:
  1. Auerbach, Alan J, 1986. "The Dynamic Effects of Tax Law Asymmetries," Review of Economic Studies, Blackwell Publishing, vol. 53(2), pages 205-25, April. [Downloadable!] (restricted)
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  2. Alan J. Auerbach & James M. Poterba, 1987. "Why Have Corporate Tax Revenues Declined?," NBER Chapters, in: Tax Policy and the Economy, Volume 1, pages 1-28 National Bureau of Economic Research, Inc. [Downloadable!]
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  3. DeAngelo, Harry & Masulis, Ronald W., 1980. "Optimal capital structure under corporate and personal taxation," Journal of Financial Economics, Elsevier, vol. 8(1), pages 3-29, March. [Downloadable!] (restricted)
  4. Mayer, Colin, 1986. "Corporation Tax, Finance and the Cost of Capital," Review of Economic Studies, Blackwell Publishing, vol. 53(1), pages 93-112, January. [Downloadable!] (restricted)
  5. Saman Majd & Stewart C. Myers, 1985. "Valuing the Government's Tax Claim on Risky Corporate Assets," NBER Working Papers 1553, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Cordes, Joseph J & Sheffrin, Steven M, 1983. " Estimating the Tax Advantage of Corporate Debt," Journal of Finance, American Finance Association, vol. 38(1), pages 95-105, March. [Downloadable!] (restricted)
  7. Jack M. Mintz, 1985. "An Empirical Estimate of Imperfect Loss Offsetting and Effective Tax Rates," Working Papers 634, Queen's University, Department of Economics.
  8. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January. [Downloadable!] (restricted)
  9. Alan J. Auerbach & James M. Poterba, 1987. "Tax Loss Carryforwards and Corporate Tax Incentives," NBER Chapters, in: The Effects of Taxation on Capital Accumulation, pages 305-342 National Bureau of Economic Research, Inc. [Downloadable!]
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