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The vanishing harberger triangle

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  • Sinn, Hans-Werner

Abstract

This paper shows that the double taxation of corporate dividends (or profit repatriations) implies a nucleus theory of the corporation. After the firm is set up with a small stock of original capital, it enters a phase of purely internal growth during which no dividends are paid and no shares are issued. The phase terminates when an efficient stock of capital has been accumulated and dividends are paid. During the growth phases, the tax distortion is inversely related to the tax burden and it is larger than conventional formulae for the cost of internal and external equity finance suggest.
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  • Sinn, Hans-Werner, 1991. "The vanishing harberger triangle," Journal of Public Economics, Elsevier, vol. 45(3), pages 271-300, August.
  • Handle: RePEc:eee:pubeco:v:45:y:1991:i:3:p:271-300
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    8. Mervyn A. King & Don Fullerton, 1984. "The Taxation of Income from Capital: A Comparative Study of the United States, the United Kingdom, Sweden, and Germany," NBER Books, National Bureau of Economic Research, Inc, number king84-1, May.
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