Economics at your fingertips  


Susan J. Guthrie and James Hines ()

National Tax Journal, 2011, vol. 64, issue 2, 731-51

Abstract: This paper considers the impact of the tax treatment of military contractors on the cost and timing of U.S. military procurement. Prior to the early 1980s, taxpayers were permitted to defer tax obligations on profits earned from long-term contracts. Legislation passed in 1982, 1986, and 1987 required that at least 70 percent of the profits earned on long-term contracts be taxed as accrued, thereby significantly reducing the tax benefits associated with long term contracting. Comparing contracts that were ineligible for these tax benefits with those that were eligible, it appears that between 1981–1989 the duration of U.S. Department of Defense contracts shortened by an average of between one and two months, or somewhere between 10 and 23 percent of average contract length. This pattern implies that the tax benefits associated with long term contracts promoted artificial contract lengthening in the 1980s, and suggests that the Department of Defense ignores the federal income tax consequences of its procurement actions, thereby indirectly rewarding contractors who benefit from tax expenditures.

Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) ... racts-during-tax.pdf (application/pdf) ... acts-during-tax.html (text/html)
Access to most recent volumes (current and past two years) is restricted to subscribers and members of the National Tax Association.

Related works:
Working Paper: U.S. Defense Contracts During the Tax Expenditure Battles of the 1980s (2008) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

National Tax Journal is currently edited by Stacy Dickert-Conlin and William M. Gentry

More articles in National Tax Journal from National Tax Association, National Tax Journal Contact information at EDIRC.
Bibliographic data for series maintained by Sally Sztrecska ().

Page updated 2019-08-20
Handle: RePEc:ntj:journl:v:64:y:2011:i:2:p:731-51