Further Evidence on the Shifting of Corporate Income Tax in Privately Owned Electric Utilities, 1948–1984

Abstract

The purpose of this article is to empirically estimate the effects of the federal corporate income tax, dividend yield, and inflation on the rate of return in investor-owned electric utilities in the United States. Using data from the period before the seventies, some authors were able to show some evidence toward a partial shifting of the tax burden in regulated utilities. An attempt is made here to reexamine these findings and extend them into the eighties. The results point to a conclusion of a short-run partial shifting of about 60% in contrast to a mere 40% reported earlier. The results do not reject the hypothesis of a significant positive relationship between the dividend yield and the profit rate, contradicting the theory that dividend policy is irrelevant. Finally, there is some indication of a depressing effect of inflation on the rate of return during the most recent inflationary time period, 1974–1984.