Affiliation:
1. Shanghai Advanced Institute of Finance, Shanghai Jiao Tong University
2. University of Minnesota and Shanghai Advanced Institute of Finance, Shanghai Jiao Tong University
Abstract
Abstract
Extensive empirical research concerning the impact of taxes on corporate decisions has had trouble identifying seemingly obvious effects. Perhaps the problem is that the seemingly obvious tax predictions are not quite right. We provide an equilibrium model with both corporate and personal taxes. In the steady-state equilibrium, the corporate tax rate affects the level of production despite interest deductibility at the firm level, but not household-level taxes on interest earnings or dividends. We prove several other tax irrelevance results and document a Laffer curve in the corporate tax rate. (JEL G31, G32, G35)
Publisher
Oxford University Press (OUP)
Subject
Economics and Econometrics,Finance,Business and International Management
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