EconPapers    
Economics at your fingertips  
 

Income Taxation and Business Incorporation: Evidence from the Early Twentieth Century

Li Liu

No 1205, Working Papers from Oxford University Centre for Business Taxation

Abstract: If the corporate income tax is set at a different rate from non-corporate in-come tax, it can play an important role in a firm’s choice of organizational form. The impact and interdependency of income tax incentives are crucial factors in the formation of designing efficient tax policies. In this paper I exploit the variation in income taxes across U.S. states in the early twentieth century to estimate these sensitivities. Potential endogeneity of state taxes is addressed using an IV approach. The results demonstrate that the relative taxation of corporate to personal income has a significant impact on the corporate share of economic activities. On average, a one percent increase in corporate taxes is associated with 0.2-0.3 percent decreases the corporate share of economic activities, whereas a one per-cent increase in personal taxes raises the corporate share of economic activities by 0.5-0.6 percent.

Keywords: Corporate income tax; Personal income tax; Incorporation; Early Twentieth Century (search for similar items in EconPapers)
JEL-codes: H25 H32 H71 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-acc, nep-his, nep-iue and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sbs.ox.ac.uk/sites/default/files/Busine ... _12/WP1205-final.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.sbs.ox.ac.uk/sites/default/files/Business_Taxation/Docs/Publications/Working_Papers/Series_12/WP1205-final.pdf [301 Moved Permanently]--> https://www.sbs.ox.ac.uk/sites/default/files/Business_Taxation/Docs/Publications/Working_Papers/Series_12/WP1205-final.pdf)

Related works:
Journal Article: Income Taxation and Business Incorporation: Evidence From the Early Twentieth Century (2014) 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: https://EconPapers.repec.org/RePEc:btx:wpaper:1205

Access Statistics for this paper

More papers in Working Papers from Oxford University Centre for Business Taxation Contact information at EDIRC.
Bibliographic data for series maintained by Dongxian Guo ( this e-mail address is bad, please contact ).

 
Page updated 2024-06-16
Handle: RePEc:btx:wpaper:1205