Working Paper: NBER ID: w0897
Authors: Jeremy I. Bulow; Lawrence H. Summers
Abstract: 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.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Corporate Income Tax (H24) | Risk Premium on Corporate Equity (G39) |
| Risk Accounting (D80) | Effective Tax Rates (H29) |
| Economic Depreciation (E20) | Tax Policy Analysis (H29) |