Personal Taxation, Portfolio Choice and The Effect of the Corporation Income Tax
Extending the traditional treatment of the corporate tax to an economy with a progressive personal tax fundamentally changes the analysis. While the corporate tax system (CTS) does increase the total tax rate on corporate source income for some investors, the exclusion of retained earnings implies that the CTS lowers the tax rate for high-income investors. Analyzing such an economy requires replacing the traditional "equal-yield" equilibrium condition with a more general portfolio balance model. In this model, introducing a CTS can actually increase the corporate share of the capital stock even though the relative tax rate on corporate income rises.
|Date of creation:||Nov 1980|
|Publication status:||published as Feldstein, Martin S. and Slemrod, Joel. "Personal Taxation, Portfolio Choice, and the Effect of the Corporation Income Tax." Journal of Political Economy, Vol. 88, No. 5, (Oct. 1980), pp. 854-866.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- Marcel K. Richter, 1960. "Cardinal Utility, Portfolio Selection and Taxation," Review of Economic Studies, Oxford University Press, vol. 27(3), pages 152-166.
- Shoven, John B. & Whalley, John, 1972.
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- Martin Feldstein & Lawrence Summers, 1983. "Inflation and the Taxation of Capital Income in the Corporate Sector," NBER Chapters, in: Inflation, Tax Rules, and Capital Formation, pages 116-152 National Bureau of Economic Research, Inc.
- Martin Feldstein & Lawrence H. Summers, 1979. "Inflation and the Taxation of Capital Income in the Corporate Sector," NBER Working Papers 0312, National Bureau of Economic Research, Inc.
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