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The Corporate Income Tax, Entrepreneurship, and the Noncorporate Sector

Author

Listed:
  • Liam P. Ebrill

    (Cornell University)

  • David G. Hartman

    (National Bureau of Economic Research)

Abstract

Harberger's analysis of the corporate income tax depends on his assumption that the corporate and noncorporate sectors produce different goods. This article modifies that assumption while arguing that the distinguishing feature of corporations lies in their ability to raise capital in a large and well organized market. Once this modification is made, the imposition of the corporate income tax has effects markedly different from those described by Harberger. In particular, it induces firms to postpone the decision to incorporate and reduces the cost of capital schedule faced by some unincorporated businesses. The corporate income tax is, in effect, a tax on size. As such, the effect of the tax on the mix of goods produced in the economy is very uncextain.

Suggested Citation

  • Liam P. Ebrill & David G. Hartman, 1983. "The Corporate Income Tax, Entrepreneurship, and the Noncorporate Sector," Public Finance Review, , vol. 11(4), pages 419-436, October.
    • Handle: RePEc:sae:pubfin:v:11:y:1983:i:4:p:419-436
    DOI: 10.1177/109114218301100402
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    References listed on IDEAS

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    1. Ebrill, Liam P & Hartman, David G, 1982. "On the Incidence and Excess Burden of the Corporation Income Tax," Public Finance = Finances publiques, , vol. 37(1), pages 48-58.
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    5. Robin Boadway & John Treddenick, 1975. "The Effects of the U.S. Corporate Tax on Resource Allocation and Welfare," Working Paper 171, Economics Department, Queen's University.
    6. Ronald W. Jones, 2018. "The Structure of Simple General Equilibrium Models," World Scientific Book Chapters, in: International Trade Theory and Competitive Models Features, Values, and Criticisms, chapter 4, pages 61-84, World Scientific Publishing Co. Pte. Ltd..
    7. Ballentine, J Gregory, 1978. "The Incidence of a Corporation Income Tax in a Growing Economy," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 863-875, October.
    8. Sandmo, Agnar, 1974. "Investment Incentives and the Corporate Income Tax," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages 287-302, Part I, M.
    9. Mieszkowski, Peter, 1972. "The property tax: An excise tax or a profits tax?," Journal of Public Economics, Elsevier, vol. 1(1), pages 73-96, April.
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    Cited by:

    1. Fullerton, Don & Henderson, Yolanda Kodrzycki, 1989. "A Disaggregate Equilibrium Model of the Tax Distortions among Assets, Sectors, and Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(2), pages 391-413, May.
    2. Roger H. Gordon & Joel Slemrod, 1998. "Are "Real" Responses to Taxes Simply Income Shifting Between Corporate and Personal Tax Bases?," NBER Working Papers 6576, National Bureau of Economic Research, Inc.

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