Tax Distortions to the Choice of Organizational Form PDF Download
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Author: Roger H. Gordon
Publisher:
ISBN:
Category : Business enterprises
Languages : en
Pages : 46
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Book Description
Income from corporate and noncorporate firms is treated very differently under the tax law. To what degree do firms change their form of organization in response? Since the relative tax treatment depends on the tax bracket of the investor, the answer will vary by the bracket of the owners. To estimate the role of taxes, we estimate what size the nontax advantage to incorporating must take in each industry so that forecasted choices for organizational form, aggregated over investors in different tax brackets, are consistent with the aggregate evidence. While these nontax costs can be large, noncorporate activity tends to be concentrated in industries where these costs are small, leading to little excess burden from the tax distortion to organizational form.
Author: Roger H. Gordon
Publisher:
ISBN:
Category : Business enterprises
Languages : en
Pages : 46
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Book Description
Income from corporate and noncorporate firms is treated very differently under the tax law. To what degree do firms change their form of organization in response? Since the relative tax treatment depends on the tax bracket of the investor, the answer will vary by the bracket of the owners. To estimate the role of taxes, we estimate what size the nontax advantage to incorporating must take in each industry so that forecasted choices for organizational form, aggregated over investors in different tax brackets, are consistent with the aggregate evidence. While these nontax costs can be large, noncorporate activity tends to be concentrated in industries where these costs are small, leading to little excess burden from the tax distortion to organizational form.
Author: MacKie-Mason. Jeffrey K.
Publisher:
ISBN:
Category :
Languages : es
Pages : 25
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Book Description
Author: Jeffrey K. MacKie-Mason
Publisher:
ISBN:
Category : Business enterprises
Languages : en
Pages : 25
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Book Description
Author: Estelle P. Dauchy
Publisher:
ISBN:
Category :
Languages : en
Pages : 12
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Book Description
One of the distortions created by the corporate income tax is that it provides incentives to shift income between corporate and non-corporate forms. In 1997, the IRS significantly relaxed this distortion by adoption the "check-the-box" (CTB) regulation. Since then, small businesses have had the option to choose to be taxed as corporations, under the corporate tax system, or as partnerships, under the individual tax system. This paper used the CTB tax reform as a natural experiment to evaluate the relevance of tax and non-tax factors in companies' choice of organizational form. As expected, I find that the choice of business form was significantly dependent on both tax and non-tax factors until the CTB reform and non-tax factors were critical in this choice. After the CTB regulation, organizational choice became independent from non-tax considerations, while tax factors became critical.
Author: Cammie Lynn Muller
Publisher:
ISBN:
Category : Corporations
Languages : en
Pages : 146
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Book Description
Author: Agata Nagel
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Author: Austan Goolsbee
Publisher:
ISBN:
Category : Corporations
Languages : en
Pages : 52
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Book Description
By changing the relative gain to incorporation, corporate taxation can play an important role in a firm's choice of organizational form. General equilibrium models have shown that substantial shifting of organizational form in response to tax rates implies a large deadweight loss of taxation. This paper estimates the impact of taxes on organizational form using data from 1900-1939. The results indicate that the effect of taxes is significant but small. A corporate rate increase of .10 raises the non-corporate share of capital .002-.03. The implied deadweight loss of the corporate income tax is around 5-10% of revenue.
Author: Michael P. Donohoe
Publisher:
ISBN:
Category :
Languages : en
Pages : 59
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Book Description
This study examines whether competition from tax-advantaged firms influences the organizational form choice of rival tax-disadvantaged firms, and explores two outcomes of this choice. Using a sample of 5,268 predominantly private U.S. commercial banks during 1997-2010, we find that greater competition from S corporation banks, which are subject to one layer of income tax, increases the likelihood that rival C corporation banks, which are subject to two layers of income tax, convert to S status. We estimate that the aggregate first-year tax savings from S conversion exceed $267 million, which converting banks can use to maintain competitive parity with their rivals. In terms of outcomes, converting banks increase their deposit market share more than non-converting banks, with advertising growth and new bank branches facilitating this increase. Non-converting banks increase their tax avoidance. Our findings provide economic insight into how competition shapes -- and is shaped by -- taxes and organizational form.
Author: Roger H. Gordon
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Author: James C. Teague
Publisher: Nova Science Pub Incorporated
ISBN: 9781622579983
Category : Business & Economics
Languages : en
Pages : 106
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Book Description
In the United States, how a business is taxed at the federal level is partly dependent on how it is organized. Publicly traded corporations known as subchapter C corporations are taxed once at the corporate level according to the corporate tax system, and then a second time at the individual-shareholder level according to the individual tax system when corporate dividend payments are made or capital gains are realized. This leads to the so-called "double taxation"of corporate profits. Businesses that choose any other form of organization are, in general, taxed only once at the individual level. That is, the income of certain businesses passes through to the individual business owners and is taxed according to the individual income tax system. Examples of these alternative "pass-through"forms of organization include sole proprietorships, partnerships, subchapter S corporations, and limited liability companies. This book summarizes the general tax treatment of corporate and pass-through businesses and analyzes the most recent business data from the Internal Revenue Service (IRS).
