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A Note On The Impact Of Progressive Dividend Taxation On Investment Decisions

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  • Santoro, Marika
  • Wei, Chao

Abstract

This paper studies the distortionary impact of progressive dividend taxation on investment decisions under the premises of the “new” view. According to the new view, proportional dividend taxation does not distort firms' investment decisions. We find that progressive dividend taxation distorts investment decisions due to endogenous variations in the marginal tax rate caused by stochastic taxable income over the business cycle. The magnitude of this distortion critically depends upon the marginal tax rate and the progressivity of the tax system.

Suggested Citation

  • Santoro, Marika & Wei, Chao, 2012. "A Note On The Impact Of Progressive Dividend Taxation On Investment Decisions," Macroeconomic Dynamics, Cambridge University Press, vol. 16(02), pages 309-319, April.
  • Handle: RePEc:cup:macdyn:v:16:y:2012:i:02:p:309-319_99
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    Cited by:

    1. Anagnostopoulos, Alexis & Cárceles-Poveda, Eva & Lin, Danmo, 2012. "Dividend and capital gains taxation under incomplete markets," Journal of Monetary Economics, Elsevier, vol. 59(7), pages 599-611.
    2. Igor Kotlán & Zuzana Machová, 2012. "Vliv zdanění korporací na ekonomický růst: selhání daňové kvóty?
      [The Influence of Corporate Taxation on Economic Growth: The Failure of Tax Quota?]
      ," Politická ekonomie, University of Economics, Prague, vol. 2012(6), pages 743-763.
    3. Igor Kotlán & Zuzana Machová & Lenka Janíčková, 2011. "Vliv zdanění na dlouhodobý ekonomický růst
      [Taxation Influence on the Economic Growth]
      ," Politická ekonomie, University of Economics, Prague, vol. 2011(5), pages 638-658.
    4. Bialowolski, Piotr & Weziak-Bialowolska, Dorota, 2014. "External factors affecting investment decisions of companies," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 8, pages 1-21.
    5. Yuhn, Ky-hyang & Bennett, Christopher S., 2016. "A Note On The Bush Tax Cuts: Did They Succeed In Stimulating Business Investment?," Macroeconomic Dynamics, Cambridge University Press, vol. 20(06), pages 1623-1639, September.

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