Chap019.ppt

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1、CHAPTER19TheCorporationTaxCopyright©2010bytheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/IrwinI’llprobablykickmyselfforhavingsaidthis,butwhenarewegoingtohavethecouragetopointoutthatinourtaxstructure,thecorporationtaxisveryhardtojustify?PresidentRonaldW.ReaganCorporatio

2、nsCorporation–Astate-charteredformofbusinessorganization,usuallywithlimitedliabilityforshareholders(owners)andanindependentlegalstatusLimitedliabilityCorporationsare“artificiallegalpersons”WhyTaxCorporations?OnlyrealpeoplecanpayataxJustificationsCorporationsaredistinctentitiesCor

3、porationsreceivespecialprivilegesfromsocietyProtectsintegrityofpersonalincometaxStructureRevenue-ExpensesincurredearningrevenuesTaxableIncome*Taxrate(15%-35%)Tax-CreditsTotalTaxAlternativeMinimumTaxTreatmentofLossesTreatmentofDividendsversusRetainedEarningsDoubletaxationEffective

4、TaxRateonCorporateCapitalStatutoryrateversuseffectiverateInterestdeductibilityDepreciationallowancesInflationDoubletaxationGravelle[2004]Effectivecorporaterate=32%;non-corporaterate=18%SensitivityofestimateIncidenceandExcessBurdenAtaxoncorporatecapitalIncidenceinageneralequilibri

5、ummodelExcessburdenonageneralequilibriummodelAtaxoneconomicprofitsIncidenceandexcessburdenofataxoneconomicprofitsActualcorporateprofitsversuseconomicprofitsStiglitz[1973]modelEffectsonBehavior–TotalPhysicalInvestmentAcceleratorModelNeoclassicalModelCashFlowModelEffectsonBehavior-

6、TypeofAssetTaxsystemencouragespurchaseofassetsthatreceiverelativelygenerousdepreciationallowancesEffectsonBehavior-CorporateFinanceWhydofirmspaydividends?Dividendsasasignaloffirm’sfinancialstrengthClienteleeffectEffectoftaxesondividendpolicyEmpiricalevidence–ChettyandSaez[2004]Ef

7、fectonsavingsDebtversusEquityFinanceStateCorporationTaxesStatetaxeshavesimilarincidenceandefficiencyproblemsasfederaltaxesVariationoftaxratesacrossstatelinesTaxationofMultinationalCorporationsStructureU.S.corporationspaytaxatstandardrateonglobaltaxableincomeCreditforforeigntaxesp

8、aidSubsidiarystatusDeferraloftaxesoninco