Some Issues Associated with Business Debt

Lawrence Klein, N. B. Gultekin, M. N. Gultekin and Q. Mohiuddin

Rodney L. White Center for Financial Research Working Papers from Wharton School Rodney L. White Center for Financial Research

Abstract: In this report we investigate the impact of the recent increase in indebtedness in the United States on tax receipts, economic stability, and economic efficiency. Evidence reported in this study shows that increased indebtedness in the corporate sector has a significant cost to the Treasury in terms of reduced tax receipts. This reduction in corporate tax receipts is not fully offset by an increase in personal taxes. It appears that corporate restructuring, together with the build-up of debt, is worrisome and bears careful monitoring, but it does not seem to lead to a financial crisis. The issue of economic stability, without access to more data, is not settled and it is difficult to make a clear case.

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Working Paper: SOME ISSUES ASSOCIATED WITH BUSINESS DEBT (1989)
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