Have Excess Returns to Corporations Been Increasing Over Time?

22 Pages Posted: 16 Jul 2016 Last revised: 20 Oct 2016

See all articles by Laura Power

Laura Power

U.S. Department of the Treasury, Office of Tax Analysis (OTA)

Austin Frerick

U.S. Department of the Treasury - Office of Tax Analysis (OTA)

Date Written: September 9, 2016

Abstract

This paper examines the difference between a corporate income tax base and a corporate consumption tax base over time. Using a micro-data panel of C corporations’ tax returns from 1992 to 2013, we estimate the fraction of the tax base attributable to the risk-free return in each year, and show that it has gradually declined over time, averaging 40 percent from 1992-2002 and 25 percent from 2003-2013. This decrease means that the difference between an income tax base and a consumption tax base has also declined, and suggests that “excess” returns are becoming more important to the tax base.

Keywords: excess returns, risk-free returns, cash flow tax

JEL Classification: H25, H22

Suggested Citation

Power, Laura and Frerick, Austin, Have Excess Returns to Corporations Been Increasing Over Time? (September 9, 2016). National Tax Journal, Vol. 69, No. 4, 2016. Available at SSRN: https://ssrn.com/abstract=2810319 or http://dx.doi.org/10.2139/ssrn.2810319

Laura Power

U.S. Department of the Treasury, Office of Tax Analysis (OTA)

1500 Pennsylvania Ave. NW
Washington, DC 20220
United States

Austin Frerick (Contact Author)

U.S. Department of the Treasury - Office of Tax Analysis (OTA) ( email )

1500 Pennsylvania Ave., N.W.
Washington, DC 22203
United States

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