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The effect of "invisible" tax preferences on investment and tax preference measures

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  • Robinson, Leslie A.
  • Sansing, Richard

Abstract

This paper develops and analyzes a model in which tax considerations and financial reporting considerations have countervailing effects on a firm's investments in internally developed intangible assets. It also proposes and estimates a new measure of tax preferences, which we call the economic effective tax rate. This measure reflects both investments in intangible assets and the use of debt financing, neither of which generates a book-tax difference. Our measure indicates that the economic effective tax rate was about 18 percent between 1988 and 2005, when the statutory tax rate was either 34 or 35 percent.

Suggested Citation

  • Robinson, Leslie A. & Sansing, Richard, 2008. "The effect of "invisible" tax preferences on investment and tax preference measures," Journal of Accounting and Economics, Elsevier, vol. 46(2-3), pages 389-404, December.
    • Handle: RePEc:eee:jaecon:v:46:y:2008:i:2-3:p:389-404
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    References listed on IDEAS

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    1. Jane G. Gravelle, 1994. "The Economic Effects of Taxing Capital Income," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262071584, December.
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    7. Don Fullerton & Andrew B. Lyon, 1988. "Tax Neutrality and Intangible Capital," NBER Chapters, in: Tax Policy and the Economy: Volume 2, pages 63-88, National Bureau of Economic Research, Inc.
    8. Hamada, Robert S, 1972. "The Effect of the Firm's Capital Structure on the Systematic Risk of Common Stocks," Journal of Finance, American Finance Association, vol. 27(2), pages 435-452, May.
    9. Chandra Kanodia & Haresh Sapra & Raghu Venugopalan, 2004. "Should Intangibles Be Measured: What Are the Economic Trade‐Offs?," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 42(1), pages 89-120, March.
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    Cited by:

    1. Anja De Waegenaere & Richard Sansing & Jacco L. Wielhouwer, 2021. "Tax Loss Carryovers in a Competitive Environment," Contemporary Accounting Research, John Wiley & Sons, vol. 38(1), pages 180-207, March.
    2. Estelle P. Dauchy, 2013. "The Efficiency Cost of Asset Taxation in the U.S. after Accounting for Intangible Assets," Working Papers w0199, Center for Economic and Financial Research (CEFIR).
    3. Elisabeth Bustos-Contell & Salvador Climent-Serrano & Gregorio Labatut-Serer, 2017. "Offshoring in the European Union: a Study of the Evolution of the Tax Burden," Contemporary Economics, Vizja University, vol. 11(2), June.
    4. Estelle P. Dauchy, 2013. "The Efficiency Cost of Asset Taxation in the U.S. after Accounting for Intangible Assets," Working Papers w0199, New Economic School (NES).
    5. Hanlon, Michelle & Heitzman, Shane, 2010. "A review of tax research," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 127-178, December.

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