Optimal Corporate Taxation Under Financial Frictions
| Autor: | Eduardo Dávila, Benjamin Hébert |
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| Rok vydání: | 2022 |
| Předmět: | |
| Zdroj: | The Review of Economic Studies. |
| ISSN: | 1467-937X 0034-6527 |
| DOI: | 10.1093/restud/rdac068 |
| Popis: | This article studies the optimal design of corporate taxes when firms have private information about future investment opportunities and face financial constraints. A government whose goal is to efficiently raise a given amount of revenue from its corporate sector should attempt to tax unconstrained firms, which value resources inside the firm less than financially constrained firms. We show that a corporate payout tax (a tax on dividends and share repurchases) can both separate constrained and unconstrained firms and raise revenue and is therefore optimal. Our quantitative analysis implies that a revenue-neutral switch from profit taxation to payout taxation would increase the overall value of existing firms and new entrants by $7\%$. This switch could be implemented in the current US tax system by making retained earnings fully deductible. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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