16 Pages Posted: 30 Jun 2000
Date Written: September 1997
By changing the relative gain to incorporation, corporate taxation can play an important role in a firm's choice of organizational form. General equilibrium models have shown that substantial shifting of organizational form in response to tax rates implies a large deadweight loss of taxation. This paper estimates the impact of taxes on organizational form using data from 1900-1939. The results indicate that the effect of taxes is significant but small. A corporate rate increase of .10 raises the non-corporate share of capital .002-.03. The implied deadweight loss of the corporate income tax is around 5-10% of revenue.
Suggested Citation: Suggested Citation
Goolsbee, Austan, Taxes, Organizational Form, and the Deadweight Loss of the Corporate Income Tax (September 1997). NBER Working Paper No. w6173. Available at SSRN: https://ssrn.com/abstract=225931