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Proportional Income Taxation and Risk-Taking


  • Evsey D. Domar
  • Richard A. Musgrave


I. Summary and conclusions, 388. — Loss offset provisions, 391. — II. The rationale of investment behavior: yield and risk defined, 393; yield and risk of an asset combination, 398; investor's indifference map and investment equilibrium, 402. — III. Taxation without loss offset: effects of the tax on yield and risk, tax sensitiveness, 403; adjustment of asset combination held, 405. popular versions of the argument, 408. — IV. Taxation with full loss offset: effects on yield and risk, 409; total risk and private risk distinguished, 410; adjustment of asset combination held, 411; total risk increased as result of tax, 412. — V. The general case, taxation with variable loss offset: effects of varying tax rate and varying loss offset, 415; adjustment of asset combination to changes in tax rate, with given loss offset, 418; adjustment to changes in loss offset, with given tax rate, 419. — VI. Qualifications, 421.

Suggested Citation

  • Evsey D. Domar & Richard A. Musgrave, 1944. "Proportional Income Taxation and Risk-Taking," The Quarterly Journal of Economics, Oxford University Press, vol. 58(3), pages 388-422.
  • Handle: RePEc:oup:qjecon:v:58:y:1944:i:3:p:388-422.

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