IDEAS home Printed from https://ideas.repec.org/p/abo/neswpt/w0199.html
   My bibliography  Save this paper

The Efficiency Cost of Asset Taxation in the U.S. after Accounting for Intangible Assets

Author

Listed:
  • Estelle P. Dauchy

    () (New Economic School)

Abstract

This paper comprehensively calculates corporate intangible assets by industry from 1998 to 2009, and evaluates the impact of expensing intangible assets on the cost of capital, the METR, and the welfare cost of inter-asset taxation, under current law and alternative tax policy including recent policy proposals. It also estimates the welfare cost of `leveling the playing field’. I find that capitalizing intangible assets can reduce the METR by up to 28 percentage points in finance. The intangible-inclusive welfare cost of inter-asset taxation is twice as large as a conventional measure under current law, and can be much larger than the tax revenue loss of alternative policy. Leveling the playing field may reduce or increase the deadweight loss of inter-asset taxation. The results provide a valuable input for research estimating the impact of investment tax incentives.

Suggested Citation

  • Estelle P. Dauchy, 2013. "The Efficiency Cost of Asset Taxation in the U.S. after Accounting for Intangible Assets," Working Papers w0199, New Economic School (NES).
  • Handle: RePEc:abo:neswpt:w0199
    as

    Download full text from publisher

    File URL: https://www.nes.ru/files/Preprints-resh/WP199.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Don Fullerton & Andrew B. Lyon, 1988. "Tax Neutrality and Intangible Capital," NBER Chapters, in: Tax Policy and the Economy: Volume 2, pages 63-88, National Bureau of Economic Research, Inc.
    2. Rainer Klump & Peter McAdam & Alpo Willman, 2012. "The Normalized Ces Production Function: Theory And Empirics," Journal of Economic Surveys, Wiley Blackwell, vol. 26(5), pages 769-799, December.
    3. Nadiri, M Ishaq & Prucha, Ingmar R, 1996. "Estimation of the Depreciation Rate of Physical and R&D Capital in the U.S. Total Manufacturing Sector," Economic Inquiry, Western Economic Association International, vol. 34(1), pages 43-56, January.
    4. Mauro Giorgio Marrano & Jonathan Haskel, 2006. "How Much Does the UK Invest in Intangible Assets?," Working Papers 578, Queen Mary University of London, School of Economics and Finance.
    5. 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.
    6. Schankerman, Mark & Pakes, Ariel, 1986. "Estimates of the Value of Patent Rights in European Countries during the Post-1950 Period," Economic Journal, Royal Economic Society, vol. 96(384), pages 1052-1076, December.
    7. Robinson, Leslie A. & Sansing, Richard, 2008. "The effect of "invisible" tax preferences on investment and tax preference measures," Journal of Accounting and Economics, Elsevier, vol. 46(2-3), pages 389-404, December.
    8. Eisner, Robert, 1989. "The Total Incomes System of Accounts," University of Chicago Press Economics Books, University of Chicago Press, number 9780226196381, Febrero.
    9. Carol Corrado & John Haltiwanger & Daniel Sichel, 2005. "Measuring Capital in the New Economy," NBER Books, National Bureau of Economic Research, Inc, number corr05-1.
    10. Fullerton, Don, 1991. "Reconciling Recent Estimates of the Marginal Welfare Cost of Taxation," American Economic Review, American Economic Association, vol. 81(1), pages 302-308, March.
    11. Carol Corrado & John Haltiwanger & Daniel Sichel, 2005. "Introduction to "Measuring Capital in the New Economy"," NBER Chapters, in: Measuring Capital in the New Economy, pages 1-10, National Bureau of Economic Research, Inc.
    12. Leonard I. Nakamura, 2001. "What is the U.S. gross investment in intangibles? (At least) one trillion dollars a year!," Working Papers 01-15, Federal Reserve Bank of Philadelphia.
    13. Edquist, Harald, 2011. "Intangible Investment and the Swedish Manufacturing and Service Sector Paradox," Working Paper Series 863, Research Institute of Industrial Economics.
    14. Christopher L. House & Matthew D. Shapiro, 2008. "Temporary Investment Tax Incentives: Theory with Evidence from Bonus Depreciation," American Economic Review, American Economic Association, vol. 98(3), pages 737-768, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Estelle P. Dauchy, 2013. "The Efficiency Cost of Asset Taxation in the U.S. after Accounting for Intangible Assets," Working Papers w0199, Center for Economic and Financial Research (CEFIR).
    2. Konstantinos A. Melachroinos & Nigel Spence, 2013. "Intangible Investment and Regional Productivity in Great Britain," Regional Studies, Taylor & Francis Journals, vol. 47(7), pages 1048-1064, July.
    3. Mariela Dal Borgo & Peter Goodridge & Jonathan Haskel & Annarosa Pesole, 2013. "Productivity and Growth in UK Industries: An Intangible Investment Approach," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 75(6), pages 806-834, December.
    4. Carol Corrado & Charles Hulten & Daniel Sichel, 2009. "Intangible Capital And U.S. Economic Growth," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(3), pages 661-685, September.
    5. Mauro Giorgio Marrano & Jonathan Haskel & Gavin Wallis, 2009. "What Happened To The Knowledge Economy? Ict, Intangible Investment, And Britain'S Productivity Record Revisited," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(3), pages 686-716, September.
    6. Kyoji Fukao & Tsutomu Miyagawa & Kentaro Mukai & Yukio Shinoda & Konomi Tonogi, 2009. "Intangible Investment In Japan: Measurement And Contribution To Economic Growth," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(3), pages 717-736, September.
    7. Giglio, Stefano & Severo, Tiago, 2012. "Intangible capital, relative asset shortages and bubbles," Journal of Monetary Economics, Elsevier, vol. 59(3), pages 303-317.
    8. Dale W. Jorgenson & J. Steven Landefeld, 2006. "Blueprint for Expanded and Integrated U.S. Accounts: Review, Assessment, and Next Steps," NBER Chapters, in: A New Architecture for the U.S. National Accounts, pages 13-112, National Bureau of Economic Research, Inc.
    9. Crass, Dirk & Licht, Georg & Peters, Bettina, 2014. "Intangible assets and investments at the sector level: Empirical evidence for Germany," ZEW Discussion Papers 14-049, ZEW - Leibniz Centre for European Economic Research.
    10. Katharine G. Abraham, 2014. "Expanded Measurement of Economic Activity: Progress and Prospects," NBER Chapters, in: Measuring Economic Sustainability and Progress, pages 25-42, National Bureau of Economic Research, Inc.
    11. Ellen R. McGrattan & Edward C. Prescott, 2010. "Technology Capital and the US Current Account," American Economic Review, American Economic Association, vol. 100(4), pages 1493-1522, September.
    12. Charles R. Hulten & Leonard I. Nakamura, 2019. "Expanded GDP for Welfare Measurement in the 21st Century," NBER Working Papers 26578, National Bureau of Economic Research, Inc.
    13. Ellen R. McGrattan & Edward C. Prescott, 2012. "The Labor Productivity Puzzle," Book Chapters, in: Lee E. Ohanian & John B. Taylor & Ian J. Wright (ed.), Government Policies and the Delayed Economic Recovery, chapter 6, Hoover Institution, Stanford University.
    14. Haskel, Jonathan & Wallis, Gavin, 2013. "Public support for innovation, intangible investment and productivity growth in the UK market sector," Economics Letters, Elsevier, vol. 119(2), pages 195-198.
    15. Anmol Bhandari & Ellen R. McGrattan, 2017. "Sweat Equity in U.S. Private Business," Staff Report 560, Federal Reserve Bank of Minneapolis.
    16. Ryan A. Decker & Pablo N. D'Erasmo & Hernan Moscoso Boedo, 2016. "Market Exposure and Endogenous Firm Volatility over the Business Cycle," American Economic Journal: Macroeconomics, American Economic Association, vol. 8(1), pages 148-198, January.
    17. Mehra, Rajnish, 2010. "Indian Equity Markets: Measures of Fundamental Value," India Policy Forum, National Council of Applied Economic Research, vol. 6(1), pages 1-38.
    18. Cheng, Wenya & Morrow, John & Tacharoen, Kitjawat, 2012. "Productivity as if space mattered: an application to factor markets across China," LSE Research Online Documents on Economics 48930, London School of Economics and Political Science, LSE Library.
    19. Bernstein, Jeffrey I. & Mamuneas, Theofanis P., 2006. "R&D depreciation, stocks, user costs and productivity growth for US R&D intensive industries," Structural Change and Economic Dynamics, Elsevier, vol. 17(1), pages 70-98, January.
    20. Carol Corrado & Paul Lengermann & Eric J. Bartelsman & J. Joseph Beaulieu, 2007. "Sectoral Productivity in the United States: Recent Developments and the Role of IT," German Economic Review, Verein für Socialpolitik, vol. 8(2), pages 188-210, May.

    More about this item

    Keywords

    Intangible Assets; Cost of Capital; Welfare Cost; Inter-asset Taxation; Bonus Depreciation;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:abo:neswpt:w0199. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Vladimir Ivanyukhin). General contact details of provider: https://edirc.repec.org/data/nerasru.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.