Working Paper: NBER ID: w1713
Authors: David F. Bradford
Abstract: If firms are indifferent about the timing of dividends, the government's cash flow from taxes on dividends is indeterminate. In an earlier paper, I showed in the context of a world without uncertainty that variations in tax receipts from this source would have no real effects. The extension of the analysis to a world of risk turns out to involve new elements that may be of some general interest. In particular, the conditions for neutrality seem less likely to be fulfilled in a practical context.
Keywords: tax payments; financial market equilibrium; government deficits; corporate distributions
JEL Codes: H21; H24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| tax rate on corporate distributions (t) (G35) | government tax receipts (H20) |
| government tax receipts (H20) | real economic outcomes (F69) |
| corporate distributions (G35) | government tax receipts (H20) |
| corporate distributions (G35) | real economic outcomes (F69) |
| government adjusts debt issuance in response to corporate distributions (G38) | neutrality of economic outcomes (D63) |
| government does not adjust debt issuance in response to corporate distributions (G30) | real effects from variations in corporate distributions (G35) |