Taxation and Corporate Financial Policy

22 Pages Posted: 29 Mar 2001 Last revised: 2 Sep 2010

See all articles by Alan J. Auerbach

Alan J. Auerbach

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Charles McLure

Hoover Institution; Stanford University

Multiple version iconThere are 2 versions of this paper

Date Written: May 1980

Abstract

A model of corporate financial policy (debt-equity ratios and dividend payout rates) is included in the Harberger general equilibrium model of incidence of the corporate income tax. Illustrative calculations of the distortions of financial policy and increases in risk premiums induced by the corporate tax are provided. Because risk premiums on corporate securities would be reduced, eliminating the corporate tax or integrating it into the personal tax would increase the income of non-corporate investors relatively more than that of investors in corporate securities, and is therefore less regressive than is commonly thought.

Suggested Citation

Auerbach, Alan Jeffrey and McLure, Charles, Taxation and Corporate Financial Policy (May 1980). NBER Working Paper No. w0243. Available at SSRN: https://ssrn.com/abstract=265686

Alan Jeffrey Auerbach (Contact Author)

University of California, Berkeley - Department of Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

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Germany

Charles McLure

Hoover Institution; Stanford University ( email )

Stanford, CA 94305-6010
United States
650-723-2657 (Phone)

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