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|
|Date of revision:|
|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.|
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- Shoven, John B. & Whalley, John, 1972.
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NBER Working Papers
0312, National Bureau of Economic Research, Inc.
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Cowles Foundation Discussion Papers
248, Cowles Foundation for Research in Economics, Yale University.
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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 755-64, Sept./Oct.
- Shoven, John B, 1976. "The Incidence and Efficiency Effects of Taxes on Income from Capital," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1261-83, December.
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