The Dynamic Effects of Tax Law Asymmetries

47 Pages Posted: 7 Jul 2004 Last revised: 27 Aug 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)

Date Written: June 1983

Abstract

Under current U.S. tax law, a distinction is made between gains and losses by businesses. Losses that must be "carried forward" are subject to two penalties: a loss of interest, and expiration after fifteen years. Previous examinations have focused on the higher expected tax payments such a tax system without "full loss offset" imposes on risky projects.This paper presents a dynamic analysis of the impact of taxation on investment when gains and losses are treated asymmetrically. The results provide a basis for analyzing recent tax changes, particularly the controversial"safe-harbor leasing" provisions of the 1981 tax legislation.

Suggested Citation

Auerbach, Alan Jeffrey, The Dynamic Effects of Tax Law Asymmetries (June 1983). NBER Working Paper No. w1152. Available at SSRN: https://ssrn.com/abstract=305536

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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