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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: Taxes and Capital Formation, pages 89-92, National Bureau of Economic Research, Inc.
    2. 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.
    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. Jack M. Mintz, 1985. "An Empirical Estimate of Imperfect Loss Offsetting and Effective Tax Rates," Working Paper 634, Economics Department, Queen's University.
    5. Alan J. Auerbach, 1983. "Corporate Taxation in the United States," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 14(2), pages 451-514.
    6. 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.
    7. 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.
    8. 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.
    9. Cordes, Joseph J & Sheffrin, Steven M, 1983. "Estimating the Tax Advantage of Corporate Debt," Journal of Finance, American Finance Association, vol. 38(1), pages 95-105, March.
    10. 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.
    11. Colin Mayer, 1986. "Corporation Tax, Finance and the Cost of Capital," Review of Economic Studies, Oxford University Press, vol. 53(1), pages 93-112.
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