Download or read book Effects of Bush Tax Cut and Obama Tax Increase on Corporate Payout Policy and Stock Returns written by Andre C. Vianna and published by . This book was released on 2018 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: This article analyzes the effects of the American Taxpayer Relief Act of 2012 (Obama Tax Increase) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (Bush Tax Cut) on corporate payout decision and stock returns. Logit and fixed-effect panel data analyses are conducted on all firms listed in NYSE, Amex and NASDAQ in the announcement windows of two, three and four quarters before and after the tax reforms. The results show that the implementation of these tax reforms more persistently affects dividend payments than stock repurchases. It also has a boosting effect on stock returns in the Bush Tax Cut that is 75 % greater than their reducing effect in the Obama Tax Increase, in absolute terms, controlling for dividend payment and stocks repurchase. These effects are robust to different market capitalization sizes. Less solvent firms persistently spend larger dollar amounts in stock repurchases, especially in the announcement of the Bush Tax Cut (1.11 % per solvency ratio percentage in the [-2Q, 2Q] window). Insolvency is more often significant and with positive impacts on stock returns in the Obama Tax Increase, suggesting that some investors decide to migrate to leveraged-high-growth firms once they realize that some dividend-paying firms could change their dividend policies.
Download or read book Bush Tax Cuts and the Economy written by Thomas L. Hungerford and published by DIANE Publishing. This book was released on 2011 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is a print on demand edition of a hard to find publication. A series of tax cuts were enacted early in the George W. Bush Admin. These tax cuts, known as the Bush tax cuts (BTC), are scheduled to expire at the end of 2010. The major tax provisions that are part of the current debate over the BTC are: reduced tax rates, reduction of the marriage penalty, repeal of the personal exemption phaseout and the limitation on itemized deductions, reduced tax rates on long-term capital gains and qualified dividends, and expanded tax credits. Contents of this report: (1) Economic and Budgetary Environment; (2) Revenue Loss and Distributional Effects from the BTC Provisions; (3) Options Regarding the BTC: Obama Administration Proposal; Temporary Extension of Some or All BTC Provisions. Charts and tables.
Download or read book False Promises written by Kevin Quinn and published by . This book was released on 1990 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Effects of Potential Tax Reforms on Stock Market Yields written by Larry L. Dildine and published by . This book was released on 1979 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Financial Frictions and Stimulative Effects of Temporary Corporate Tax Cuts written by William Gbohoui and published by International Monetary Fund. This book was released on 2019-05-07 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper uses an industry equilibrium model where some firms are financially constrained to quantify the effects of a transitory corporate tax cut funded by a future tax increase on the U.S. economy. It finds that by increasing current cash-flows tax cuts alleviate financing frictions, hereby stimulating current investment. Per dollar of tax stimulus, aggregate investment increases by 26 cents on impact, and aggregate output by 3.5 cents. The average effect masks heterogeneity: multipliers are close to 1 for constrained firms, especially new entrants, and negative for larger and unconstrained firms. The output effects extend well past the period the policy is reversed, leading to a cumulative multiplier of 7.2 cents. Multipliers are significantly larger when controlling for the investment crowding-out effect among unconstrained firms.
Download or read book Corporate Payout Policy written by Harry DeAngelo and published by Now Publishers Inc. This book was released on 2009 with total page 215 pages. Available in PDF, EPUB and Kindle. Book excerpt: Corporate Payout Policy synthesizes the academic research on payout policy and explains "how much, when, and how". That is (i) the overall value of payouts over the life of the enterprise, (ii) the time profile of a firm's payouts across periods, and (iii) the form of those payouts. The authors conclude that today's theory does a good job of explaining the general features of corporate payout policies, but some important gaps remain. So while our emphasis is to clarify "what we know" about payout policy, the authors also identify a number of interesting unresolved questions for future research. Corporate Payout Policy discusses potential influences on corporate payout policy including managerial use of payouts to signal future earnings to outside investors, individuals' behavioral biases that lead to sentiment-based demands for distributions, the desire of large block stockholders to maintain corporate control, and personal tax incentives to defer payouts. The authors highlight four important "carry-away" points: the literature's focus on whether repurchases will (or should) drive out dividends is misplaced because it implicitly assumes that a single payout vehicle is optimal; extant empirical evidence is strongly incompatible with the notion that the primary purpose of dividends is to signal managers' views of future earnings to outside investors; over-confidence on the part of managers is potentially a first-order determinant of payout policy because it induces them to over-retain resources to invest in dubious projects and so behavioral biases may, in fact, turn out to be more important than agency costs in explaining why investors pressure firms to accelerate payouts; the influence of controlling stockholders on payout policy --- particularly in non-U.S. firms, where controlling stockholders are common --- is a promising area for future research. Corporate Payout Policy is required reading for both researchers and practitioners interested in understanding this central topic in corporate finance and governance.
Download or read book The Long run Impact on Federal Tax Revenues and Capital Allocation of a Cut in the Capital Gains Tax Rate written by Patric H. Hendershott and published by . This book was released on 1989 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: Model simulations are run to obtain a range of realistic estimates of the long-run revenue impact of a capital-gains tax-rate cut to a maximum of 15 percent. The basic vehicle for the simulations is a slightly modified version of the Galper-Lucice-Toder (GLT) general equilibrium model. The key behavioral assumptions affecting the estimates are: (1) the portfolio and tangible capital reallocations implicit in the structure of the GLT model, (2) corporate payouts responses based on recent empirical estimates, and (3) illustrative noncorporate recharacterizations of regular income as capital gains. The essential message of this paper is that the strong emphasis in the literation on the realization response to a capital gains tax rate cut has been appropriate. The payout/recharacterization and portfolio redistribution/reallocation effects do not appear to be large. Moreover, the portfolio responses, within the context of the GLT model, act to raise tax revenues (substitution of taxable business capital for tax free household and state and local capital), not lower them as has been conjectured. Thus these responses offset the payout/recharacterization effects, leaving the realization response as basically the total response. Future research could, of course, modify this finding.
Download or read book Taxing the Future written by Arjay and Frances Miller Chair in Federal Economic Policy Director Retirement Security Project and Co-Director William G Gale and published by . This book was released on 2008-09-30 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Tax cuts were the central economic policy focus of the Bush administration from 2001 to 2004. Every year, the administration advocated and succeeded in enacting significant tax reductions, all of which expire by the end of the decade. These policies represent a major shift in the design and impact of the American tax system. Additional changes proposed by the administration--to dramatically expand tax-preferred saving accounts and to make the existing tax cuts permanent--would move even farther in new directions. This book provides an economic assessment of the Bush administration's past and ongoing drive for tax cuts. William Gale and Peter Orszag, noted scholars in tax policy, provide historical context for the administration's tax policy and examine its effect on both short- and long-term economic growth. The authors assess the consequences for the federal budget from the enacted and proposed changes in the tax system and examine who wins and who will ultimately lose from the overall effects of the tax cuts. They also examine the links between the administration's tax agenda, government spending, and broader-based tax reform options. Taxing the Future emphasizes that low- and moderate-income households in future generations may ultimately be the ones who pay the most to finance today's tax reductions.
Download or read book Corporate Payouts and the Tax Price of Corporate Retentions written by R. Glenn Hubbard and published by . This book was released on 1989 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many provisions of the U.S. tax code affect corporate decisions to pay out or retain earnings. Most studies of these effects have examined the effects of dividend and capital gains taxes on payouts. Relatively few studies have considered the effects of corporate taxes on retentions. In the early 1900s, the United States experimented with several corporate taxes on retentions. These taxes increased the price of corporate retentions, thereby encouraging corporate payouts. This paper studies the response of corporations to the most significant of these experiments the Undistributed Profits Tax of 1936-1938. While the U.S. no longer directly taxes corporate retentions, our study provides empirical results relevant to two recent policy debates. First, to the extent that corporate payouts did respond significantly to a change in the corporate price of retentions, we can learn more about the implicit prices corporations place on internal funds. These estimates enable us better understand the effects of government policies designed to encourage corporate reinvestment. Second, our study provides evidence relevant to several recent proposals designed to resolve managerial agency problems. These proposals require managers to payout their "free" cash flows as a way of committing not to waste financial capital. The Undistributed Profits Tax of 1936-1938 had a similar goal. Its maximum marginal tax rate of 27 percent on corporate retentions gave managers strong incentives to pay out retained earnings. We study the effects of the Undistributed Profits Tax on corporate payouts using a panel data set on 26 large petroleum companies. These data have a number of advantages, not the least of which is the relative homogeneity of petroleum firms' investment opportunities. We find that on average corporate payout policies did respond significantly to the surtax in 1936, the first year of the tax. There was much less of a response in 1937, and practically none in the last year, 1938. The smaller payouts in 1937 and 1938 suggest that managers were able to find margins other than dividends through which they could reduce their tax burden. These other margins included the short-term manipulation of expenses and delays in recognizing revenues. These responses suggest that managers place a relatively high valuation on internal versus external funds. They also suggest that proposals that would require managers to payout free cash flows must resolve an important incentive problem -- how to get managers to reveal fully what cash flows are "free." Finally, our results document the importance of recognizing behavioral responses to taxes. That is, firms may respond to changes in relative tax prices by finding other margins by which they can reduce their tax burdens.
Download or read book Effects of Taxation written by Dan Throop Smith and published by . This book was released on 1952 with total page 328 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Does the Corporate Tax Reform II Affect Corporate Behavior written by and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: I study to what extent reductions in dividend and capital taxation influence payout behavior, investment activity, and the use of equity financing. To isolate causality, I design a quasi-experiment exploiting an exogenous reduction in dividend and capital taxation following the implementation of the Corporate Tax Reform II in Switzerland. Using a sample of 183 Swiss listed companies over the period from 2005 to 2013, I find that treated firms significantly increase their payout ratios relative to control firms and relative to the level within-firm in the period prior to the exogenous reform shock. These findings demonstrate that firms do in fact adjust their payout behavior to a changing legislative environment and increase their payout ratios as a consequence of the dividend tax cut. Moreover, the dividend tax cut leads to a significant increase in investment activity. My paper hence supports the "old view" of the impact of dividend tax cuts on investment activity and provides evidence that dividend tax cuts can in fact positively impact corporate investment activity and subsequently benefit the economy on aggregate. I do not, however, find any significant relationship between the dividend tax cut and an increased use of external equity capital to raise funds. Furthermore, my findings do not confirm that a reduction in capital taxation results in an increase in investment activity or the use of equity financing.
Download or read book Voting in Context written by John Rogers and published by Cambridge Scholars Publishing. This book was released on 2019-11-01 with total page 115 pages. Available in PDF, EPUB and Kindle. Book excerpt: The economy is a key issue in every national election, and the US election of 2020 is no exception. Candidates campaign on economic miracles, but without context it can be difficult to distinguish the ideas that lead to a strong economy from those destined to fail. This book provides a concise guide to deciphering candidate proposals with straightforward, non-partisan descriptions of how the American economy functions, and why some ideas might make better sense than others. Economics, in its most elegant form, is the study of cause and effect. By placing economic theories within their ideological context and describing how they have been applied throughout American history, this book lays the groundwork for an informed vote in future elections in support of the reader’s own economic interests.
Download or read book Essays on the Effects of Corporate Taxation written by William Dieudonné Yélian Gbohoui and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis is a collection of three papers in macroeconomics and public finance. It develops Dynamic Stochastic General Equilibrium Models with a special focus on financial frictions to analyze the effects of changes in corporate tax policy on firm level and macroeconomic aggregates. Chapter 1 develops a dynamic general equilibrium model with a representative firm to assess the short-run effects of changes in the timing of corporate profit taxes. First, it extends the Ricardian equivalence result to an environment with production and establishes that a temporary corporate profit tax cut financed by future tax-increase has no real effect when the tax is lump sum and capital markets are perfect. Second, I assess how strong the ricardian forces are in the presence of financing frictions. I find that when equity issuance is costly, and when the firm faces a lower bound on dividend payments, a temporary tax cut reduces temporary the marginal cost of investment and implies positive marginal propensity of investment. Third, I analyze how do the intertemporal substitution effects of tax cuts interact with the stimulative effects when tax is not lump-sum. The results show that when tax is proportional to corporate profit, the expectations of high future tax rates reduce the expected marginal return on investment and mitigate the stimulative effects of tax cuts. The net investment response depends on the relative strength of each effect. Chapter 2 is co-authored with Rui Castro. In this paper, we quantify how effective temporary corporate tax cuts are in stimulating investment and output via relaxation of financing frictions. In fact, policymakers often rely on temporary corporate tax cuts in order to provide incentives for business investment in recession times. A common motivation is that such policies help relax financing frictions, which might bind more during recessions. We assess whether this mechanism is effective. In an industry equilibrium model where some firms are financially constrained, marginal propensities to invest are high. We consider a transitory corporate tax cut, funded by public debt. By increasing current cash flows, corporate tax cuts are effective at stimulating current investment. On impact, aggregate investment increases by 26 cents per dollar of tax stimulus, and aggregate output by 3.5 cents. The stimulative output effects are long-lived, extending past the period the policy is reversed, leading to a cumulative effect multiplier on output of 7.2 cents. A major factor preventing larger effects is that this policy tends to significantly crowd out investment among the larger, unconstrained firms. Chapter 3 studies the effects of the 1992's U.S. Treasury Department proposal of a Comprehensive Business Income Tax (CBIT) reform. According to the U.S. tax code, dividend and capital gain are taxed at the firm level and further taxed when distributed to shareholders. This double taxation may reduce the overall return on investment and induce inefficient capital allocation. Therefore, tax reforms have been at the center of numerous debates among economists and policymakers. As part of this debate, the U.S. Department of Treasury proposed in 1992 to abolish dividend and capital gain taxes, and to use a Comprehensive Business Income Tax (CBIT) to levy tax on corporate income. In this paper, I use an industry equilibrium model where firms are subject to financing frictions, and idiosyncratic productivity and entry/exit shocks to assess the long run effects of the CBIT. I find that the elimination of the capital gain and dividend taxes is not self financing. More precisely, the corporate profit tax rate should be increased from 34\% to 42\% to keep the reform revenue-neutral. Overall, the results show that the CBIT reform reduces capital accumulation and output by 8\% and 1\%, respectively. However, it improves capital allocation by 20\%, resulting in an increase in aggregate productivity by 1.41\% and in a modest welfare gain.
Download or read book Corporate Tax Reform written by Jane Gravelle and published by Createspace Independent Publishing Platform. This book was released on 2017-10-10 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: Interest in corporate tax reform that lowers the rate and broadens the base has developed in the past several years. Some discussions by economists in opinion pieces have suggested there is an urgent need to lower the corporate tax rate, but not necessarily to broaden the tax base, an approach that presents some difficulties given current budget pressures. Others see the corporate tax as a potential source of revenue. Arguments for lowering the corporate tax rate include the traditional concerns about economic distortions arising from the corporate tax and newer concerns arising from the increasingly global nature of the economy. Some claims have been made that lowering the corporate tax rate would raise revenue because of the behavioral responses, an effect that is linked to an open economy. Although the corporate tax has generally been viewed as contributing to a more progressive tax system because the burden falls on capital income and thus on higher-income individuals, claims have also been made that the burden falls not on owners of capital, but on labor income. The analysis in this report suggests that many of the concerns expressed about the corporate tax are not supported by empirical evidence. Claims that behavioral responses could cause revenues to rise if rates were cut do not hold up on either a theoretical or an empirical basis. Studies that purport to show a revenue-maximizing corporate tax rate of 30% (a rate lower than the current statutory tax rate) contain econometric errors that lead to biased and inconsistent results; when those problems are corrected the results disappear. Cross-country studies to provide direct evidence showing that the burden of the corporate tax actually falls on labor yield unreasonable results and prove to suffer from econometric flaws that also lead to a disappearance of the results when corrected, in those cases where data were obtained and the results replicated. Many studies that have been cited are not relevant to the United States because they reflect wage bargaining approaches and unions have virtually disappeared from the private sector in the United States. Overall, the evidence suggests that the tax is largely borne by capital. Similarly, claims that high U.S. tax rates will create problems for the United States in a global economy suffer from a misrepresentation of the U.S. tax rate compared with other countries and are less important when capital is imperfectly mobile, as it appears to be. Although these new arguments appear to rely on questionable methods, the traditional concerns about the corporate tax appear valid. While an argument may be made that the tax is still needed as a backstop to individual tax collections, it does result in some economic distortions. These economic distortions, however, have declined substantially over time as corporate rates and shares of output have fallen. Moreover, it is difficult to lower the corporate tax without creating a way of sheltering individual income given the low tax rates on dividends and capital gains. A number of revenue-neutral changes are available that could reduce these distortions, allow for a lower corporate statutory tax rate, and lead to a more efficient corporate tax system. These changes include base broadening, reducing the benefits of debt finance through inflation indexing, taxing large pass-through firms as corporations, and reducing the tax at the firm level offset by an increase at the individual level. Nevertheless, the scope for reducing the tax rate in a revenue-neutral way may be limited.
Download or read book Taxing Corporate Income in the 21st Century written by Alan J. Auerbach and published by Cambridge University Press. This book was released on 2007-04-16 with total page 401 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book was first published in 2007. Most countries levy taxes on corporations, but the impact - and therefore the wisdom - of such taxes is highly controversial among economists. Does the burden of these taxes fall on wealthy shareowners, or is it passed along to those who work for, or buy the products of, corporations? Can a country with high corporate taxes remain competitive in the global economy? This book features research by leading economists and accountants that sheds light on these and related questions, including how taxes affect corporate dividend policy, stock market value, avoidance, and evasion. The studies promise to inform both future tax policy and regulatory policy, especially in light of the Sarbanes-Oxley Act and other actions by the Securities and Exchange Commission that are having profound effects on the market for tax planning and auditing in the wake of the well-publicized accounting scandals in Enron and WorldCom.
Download or read book Revenue Effects of Major Tax Bills written by Tempalski and published by CreateSpace. This book was released on 2015-01-03 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: Since the federal income tax was significantly expanded in 1940, several dozen major tax bills have been enacted. Inevitably, discussions (and disagreements) have arisen concerning the relative size of the bills effects on federal revenues.This paper uses revenue estimates from Treasury and the Joint Committee on Taxation to compare the relative size of the revenue effect of the major tax bills enacted after 1939 using four different measures. An appendix provides a short list of the major provisions in the bills.
Download or read book Rich States Poor States written by Arthur B. Laffer and published by . This book was released on 2009-03 with total page 164 pages. Available in PDF, EPUB and Kindle. Book excerpt:
