The Taxation of Risky Assets
This paper reconsiders the effects of taxation on risky assets, recognizing the importance of variations in asset prices. We show that earlier analyses which assumed that depreciation rates are constant and that the future price of capital goods is known with certainty are very misleading, as guides to the effects of corporate taxes. We then examine the concept of economic depreciation in a risky environment, and show that depreciation allowances, if set ex-ante, should be adjusted to take account of future asset price risk. Some empirical calculations suggest that these adjustments are large, and have important implications for the burdens of, and non-neutralities in, the corporate income tax.
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- Feldstein, Martin S, 1969. "The Effects on Taxation on Risk Taking," Journal of Political Economy, University of Chicago Press, vol. 77(5), pages 755-764, Sept./Oct.
- Ben S. Bernanke, 1983. "Irreversibility, Uncertainty, and Cyclical Investment," The Quarterly Journal of Economics, Oxford University Press, vol. 98(1), pages 85-106.
- J. Tobin, 1958.
"Liquidity Preference as Behavior Towards Risk,"
Review of Economic Studies,
Oxford University Press, vol. 25(2), pages 65-86.
- Robert J. Gordon, 1982.
"Energy Efficiency, User-Cost Change, and the Measurement of Durable Goods Prices,"
in: The U.S. National Income and Product Accounts: Selected Topics, pages 205-268
National Bureau of Economic Research, Inc.
- Robert J. Gordon, 1979. "Energy Efficiency, User Cost Changes, and the Measurement of Durable Goods Prices," NBER Working Papers 0408, National Bureau of Economic Research, Inc.
- Roger H. Gordon, 1981. "Taxation of Corporate Capital Income: Tax Revenues vs. Tax Distortions," NBER Working Papers 0687, National Bureau of Economic Research, Inc.
- Lawrence H. Summers, 1981. "Taxation and Corporate Investment: A q-Theory Approach," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 12(1), pages 67-140.
- Jack M. Mintz, 1981. "Some Additional Results on Investment, Risk Taking, and Full Loss Offset Corporate Taxation with Interest Deductibility," The Quarterly Journal of Economics, Oxford University Press, vol. 96(4), pages 631-642.
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