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The Dynamic Effects of Tax Law Asymmetries

  • Auerbach, Alan J

Under current U.S. tax law, a distinction is made between gains and losses by businesses. Losses that must be "carried forward" are subject to two penalties: a loss of interest, and expiration after fifteen years. Previous examinations have focused on the higher expected tax payments such a tax system without "full loss offset" imposes on risky projects.This paper presents a dynamic analysis of the impact of taxation on investment when gains and losses are treated asymmetrically. The results provide a basis for analyzing recent tax changes, particularly the controversial"safe-harbor leasing" provisions of the 1981 tax legislation.

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Article provided by Wiley Blackwell in its journal Review of Economic Studies.

Volume (Year): 53 (1986)
Issue (Month): 2 (April)
Pages: 205-25

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Handle: RePEc:bla:restud:v:53:y:1986:i:2:p:205-25
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