Tax Distortions to the Choice of Organizational Form

27 Pages Posted: 25 Jul 2007 Last revised: 22 Jul 2010

See all articles by Roger H. Gordon

Roger H. Gordon

University of California, San Diego (UCSD) - Department of Economics; Harvard University - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Jeffrey K. MacKie-Mason

UC Berkeley; University of Michigan

Date Written: December 1992

Abstract

Income from corporate and noncorporate firms is treated very differently under the tax law. To what degree do firms change their form of organization in response? Since the relative tax treatment depends on the tax bracket of the investor, the answer will vary by the bracket of the owners. To estimate the role of taxes, we estimate what size the nontax advantage to incorporating must take in each industry so that forecasted choices for organizational form, aggregated over investors in different tax brackets, are consistent with the aggregate evidence. While these nontax costs can be large, noncorporate activity tends to be concentrated in industries where these costs are small, leading to little excess burden from the tax distortion to organizational form.

Suggested Citation

Gordon, Roger H. and MacKie-Mason, Jeffrey K., Tax Distortions to the Choice of Organizational Form (December 1992). NBER Working Paper No. w4227. Available at SSRN: https://ssrn.com/abstract=478694

Roger H. Gordon (Contact Author)

University of California, San Diego (UCSD) - Department of Economics ( email )

9500 Gilman Drive
La Jolla, CA 92093-0508
United States
858-534-4828 (Phone)
858-534-7040 (Fax)

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jeffrey K. MacKie-Mason

UC Berkeley ( email )

102 South Hall
Berkeley, CA 94720-4600
United States

HOME PAGE: http://jeff-mason.com

University of Michigan ( email )

Ann Arbor, MI 48109-1092
United States

HOME PAGE: http://http:/jeff-mason.com/

Register to save articles to
your library

Register

Paper statistics

Downloads
20
Abstract Views
417
PlumX Metrics