Inflation and the Taxation of Capital Income in the Corporate Sector

52 Pages Posted: 27 Apr 2000 Last revised: 6 Jan 2002

See all articles by Martin S. Feldstein

Martin S. Feldstein

National Bureau of Economic Research (NBER); Harvard University

Lawrence H. Summers

Harvard University; National Bureau of Economic Research (NBER); Harvard University - Harvard Kennedy School (HKS)

Date Written: 1979

Abstract

This detailed examination of the effect of inflation on the taxation of capital used by nonfinancial corporations considers not only the tax paid by the corporations them- selves but also the tax paid by the individuals and institutions that provide capital to the corporate sector. Although corporations deduct nominal interest payments that exceed real interest, the additional taxes that lenders pay slightly exceed the tax saving by corporate borrowers. Our calculations indicate that inflation raised the 1977 tax burden on corporate sector capital income by more than $32 billion, a 50 percent increase in the total tax burden.

Suggested Citation

Feldstein, Martin S. and Summers, Lawrence H., Inflation and the Taxation of Capital Income in the Corporate Sector (1979). NBER Working Paper No. w0312. Available at SSRN: https://ssrn.com/abstract=227040

Martin S. Feldstein (Contact Author)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-868-3905 (Phone)
617-868-7194 (Fax)

Harvard University ( email )

Littauer Center
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-495-2167 (Phone)
617-496-5444 (Fax)

Lawrence H. Summers

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States
617-495-1502 (Phone)
617-495-8550 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
41
Abstract Views
946
PlumX Metrics