Issues in the Measurement and Interpretation of Effective Tax Rates / David F. Bradford, Charles Stuart.

Format:

Book

Author/Creator:

Bradford, David F.

Contributor:

National Bureau of Economic Research.

Stuart, Charles.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1975.

NBER working paper series no. w1975

Language:

English

Subjects (All):

Investments--Taxation.

Investments.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1986.

Cambridge, Mass. : National Bureau of Economic Research, 1986.

Summary:

Marginal effective tax rates on investment that are derived from the user cost of capital are nowadays widely used practically to assess the effects of capital taxation. In this paper, we examine several troublesome issues in the construction and use of marginal effective tax rates and user costs of capital. Our comments fall into two classes. In the first are concerns about the adequacy of the current generation of models of capital-market equilibrium, into which marginal effective tax rates (user costs) are incorporated. In the second are concerns about the appropriateness of the assumption, implicit and nearly universal in marginal effective tax rate calculations, that investors expect a given tax code to remain unchanged forever. We show that effects of current changes in the law on expectations about future changes may undo or even reverse the effects predicted by traditionally calculated effective tax rates.

Notes:

Print version record

July 1986.