The Significance of Tax Law Asymmetries: an Empirical Investigation

56 Pages Posted: 19 Jul 2004 Last revised: 28 Sep 2010

See all articles by Rosanne Altshuler

Rosanne Altshuler

Rutgers, The State University of New Jersey - Department of Economics

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 1987

Abstract

This study uses tax return data for U.S. nonfinancial corporations for the period 1971-82 to estimate the importance of restrictions on the ability of firms to use tax credits and to obtain refunds for tax losses. Our results suggest that the incidence of such unused tax benefits increased substantially during the early 1980s, though we do not find these increases attributable to increased investment incentives during that period. Using estimates of a three-state (taxable, not taxable, partially taxable) transition probability model, we calculate the effective tax rates on various types of investments undertaken by firms differing with respect to tax status. We confirm previous findings about the marginal tax rate on interest payments, and that it is important to distinguish current tax payments from marginal tax rates in estimating the incentive to invest.

Suggested Citation

Altshuler, Rosanne and Auerbach, Alan Jeffrey, The Significance of Tax Law Asymmetries: an Empirical Investigation (June 1987). NBER Working Paper No. w2279. Available at SSRN: https://ssrn.com/abstract=347053

Rosanne Altshuler (Contact Author)

Rutgers, The State University of New Jersey - Department of Economics ( email )

75 Hamilton Street
New Jersey Hall
New Brunswick, NJ 08901
United States

Alan Jeffrey Auerbach

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

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States
510-643-0711 (Phone)
510-643-0413 (Fax)

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
United States

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

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Munich, DE-81679
Germany

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