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The Significance of Tax Law Asymmetries: An Empirical Investigation

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  • Rosanne Altshuler
  • Alan J. Auerbach

Abstract

This study uses tax return data for U. S. nonfinancial corporations for the period 1971–1982 to estimate the importance of restrictions on the ability of firms to use tax credits and to obtain refunds for tax losses. Our results suggest that the incidence of such unused tax benefits increased substantially during the early 1980s, though we do not find these increases attributable to increased investment incentives during that period. We present estimates of the marginal tax rate on interest payments which take into account unused tax benefits and emphasize the importance of distinguishing current tax payments from marginal tax rates in estimating the incentive to invest.

Suggested Citation

  • Rosanne Altshuler & Alan J. Auerbach, 1990. "The Significance of Tax Law Asymmetries: An Empirical Investigation," The Quarterly Journal of Economics, Oxford University Press, vol. 105(1), pages 61-86.
  • Handle: RePEc:oup:qjecon:v:105:y:1990:i:1:p:61-86.
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    1. Alan J. Auerbach & James M. Poterba, 1987. "Tax Loss Carryforwards and Corporate Tax Incentives," NBER Chapters, in: The Effects of Taxation on Capital Accumulation, pages 305-342, National Bureau of Economic Research, Inc.
    2. DeAngelo, Harry & Masulis, Ronald W., 1980. "Optimal capital structure under corporate and personal taxation," Journal of Financial Economics, Elsevier, vol. 8(1), pages 3-29, March.
    3. Alan J. Auerbach, 1986. "The Dynamic Effects of Tax Law Asymmetries," Review of Economic Studies, Oxford University Press, vol. 53(2), pages 205-225.
    4. Alan J. Auerbach & David Reishus, 1988. "The Effects of Taxation on the Merger Decision," NBER Chapters, in: Corporate Takeovers: Causes and Consequences, pages 157-190, National Bureau of Economic Research, Inc.
    5. Jack M. Mintz, 1985. "An Empirical Estimate of Imperfect Loss Offsetting and Effective Tax Rates," Working Paper 634, Economics Department, Queen's University.
    6. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    7. Alan J. Auerbach & James M. Poterba, 1987. "Why Have Corporate Tax Revenues Declined?," NBER Chapters, in: Tax Policy and the Economy, Volume 1, pages 1-28, National Bureau of Economic Research, Inc.
    8. Saman Majd & Stewart C. Myers, 1985. "Valuing the Government's Tax Claim on Risky Corporate Assets," NBER Working Papers 1553, National Bureau of Economic Research, Inc.
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