The Taxation of Risky Assets

40 Pages Posted: 8 Jan 2008

See all articles by Jeremy Bulow

Jeremy Bulow

Stanford University; National Bureau of Economic Research (NBER)

Lawrence H. Summers

Harvard University; National Bureau of Economic Research (NBER); Harvard University - Harvard Kennedy School (HKS)

Date Written: June 1982

Abstract

This paper reconsiders the effects of taxation on risky assets, recognizing the importance of variations in asset prices. We show that earlier analyses which assumed that depreciation rates are constant and that the future price of capital goods is known with certainty are very misleading, as guides to the effects of corporate taxes. We then examine the concept of economic depreciation in a risky environment, and show that depreciation allowances, if set ex-ante, should be adjusted to take account of future asset price risk. Some empirical calculations suggest that these adjustments are large, and have important implications for the burdens of, and non-neutralities in, the corporate income tax.

Suggested Citation

Bulow, Jeremy I. and Summers, Lawrence H., The Taxation of Risky Assets (June 1982). NBER Working Paper No. w0897. Available at SSRN: https://ssrn.com/abstract=351419

Jeremy I. Bulow (Contact Author)

Stanford University ( email )

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National Bureau of Economic Research (NBER)

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Lawrence H. Summers

Harvard University ( email )

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Cambridge, MA 02138
United States
617-495-1502 (Phone)
617-495-8550 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

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