Does the Tax System Favor Investment in High-Tech or Smoke-Stack Industries?
When tax rates vary by asset, a "hidden" industrial policy may aid industries that invest in a certain mix of assets. In this paper, we examine whether differential use of depreciable assets gives rise to differential tax treatment of high technology industries relative to other industries. First, we calculate the total effective tax rate on a marginal investment in each of 34 assets. Next, using these asset-specific tax rates and weighting by the use of these assets in each of 73 different industries, we calculate total effective tax rates at the industry level. We find considerable variation within the high-tech sector and within the more traditional sector, but for the case of a taxable firm with a given debt/equity ratio, we do not find any systematic differences between overall rates in the two sectors.
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Volume (Year): 24 (1986)
Issue (Month): 3 (July)
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- Feldstein, Martin & Dicks-Mireaux, Louis & Poterba, James, 1983.
"The effective tax rate and the pretax rate of return,"
Journal of Public Economics,
Elsevier, vol. 21(2), pages 129-158, July.
- Martin Feldstein & James M. Poterba & Louis Dicks-Mireaux, 1981. "The Effective Tax Rate and the Pretax Rate of Return," NBER Working Papers 0740, National Bureau of Economic Research, Inc.
- Martin Feldstein & Lawrence Summers, 1983. "Inflation and the Taxation of Capital Income in the Corporate Sector," NBER Chapters,in: Inflation, Tax Rules, and Capital Formation, pages 116-152 National Bureau of Economic Research, Inc.
- Martin Feldstein & Lawrence H. Summers, 1979. "Inflation and the Taxation of Capital Income in the Corporate Sector," NBER Working Papers 0312, National Bureau of Economic Research, Inc.
- Don Fullerton, 1983. "Which Effective Tax Rate?," NBER Working Papers 1123, National Bureau of Economic Research, Inc.
- Stiglitz, Joseph E., 1973. "Taxation, corporate financial policy, and the cost of capital," Journal of Public Economics, Elsevier, vol. 2(1), pages 1-34, February. Full references (including those not matched with items on IDEAS)
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