Taxation and Corporate Payout Policy / James Poterba.

Format:

Book

Author/Creator:

Poterba, James.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w10321.

NBER working paper series no. w10321

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2004.

Summary:

This paper presents new evidence on how corporate payout policy responds to the differential between the tax burden on dividend income and that on accruing capital gains. It describes the construction of weighted average marginal tax rate series for the period since 1929, and it suggests that the enactment of the Job Growth of Taxpayer Relief Reconciliation Act of 2003 should raise the after-tax value of dividends relative to capital gains by more than five percentage points. The impact of this change on payout depends on the elasticity of dividend payments with respect to the after-tax value of dividend income relative to capital gains. Time series estimates suggest an elasticity of more than three, and imply that the recent tax reform could ultimately increase dividends by almost twenty percent.

Notes:

Print version record

February 2004.