Corporate Tax Minimization and the Effectiveness of Investment Tax Incentives
Proceedings of the 100th Annual Conference on Taxation
11 Pages Posted: 6 Nov 2013 Last revised: 9 Nov 2013
Date Written: November 5, 2008
Clarifying the relationship between corporate tax minimization and the incentive to invest is particularly important because of the size of corporate tax minimization or avoidance and the recurrent use of tax incentives as attempts to spur business investment. In this paper, we empirically estimate the effect of an investment tax incentive known as the bonus depreciation that was passed in 2002, and extended in 2003 using firm level data. In our most robust specifications we find a small but not significant effect of bonus depreciation on investment and a small but not significant evidence that tax minimization opportunities have mitigated its effectiveness.
Keywords: Bonus Depreciation, Investment Tax Incentives, Corporate Taxation, Tax Avoidance
JEL Classification: H25, G31, E01
Suggested Citation: Suggested Citation