Authors
Roger H Gordon, Jeffrey K MacKie-Mason
Publication date
1994/10/1
Journal
Journal of Public Economics
Volume
55
Issue
2
Pages
279-306
Publisher
North-Holland
Description
Income from corporate and noncorporate firms is treated very differently under the tax law. In theory, given existing tax law, the noncorporate sector should consist of very profitable firms owned by low-tax-bracket investors and firms with tax losses owned by high-tax-bracket investors. But the degree to which firms change their form of organization in response to taxes, and the resulting excess burden, depends as well on nontax factors. Given the role of taxes, we estimate what size the nontax advantage to incorporating must take in each industry so that the forecasted choices for organizational form, aggregated over investors in different tax brackets, are consistent with the aggregate evidence. While the estimated nontax costs are large in some industries, noncorporate activity tends to be concentrated where the costs are small, leading to little excess burden from the tax distortion to organizational form.
Total citations
Scholar articles
RH Gordon, JK MacKie-Mason - Journal of Public Economics, 1994
JK MacKie-Mason, RH Gordon - 1991