Tax Distortions to the Choice of Organizational Form

Roger Gordon and Jeffrey Mackie-Mason

No 4227, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Income from corporate and noncorporate firms is treated very differently under the tax law. To what degree do firms change their form of organization in response? Since the relative tax treatment depends on the tax bracket of the investor, the answer will vary by the bracket of the owners. To estimate the role of taxes, we estimate what size the nontax advantage to incorporating must take in each industry so that forecasted choices for organizational form, aggregated over investors in different tax brackets, are consistent with the aggregate evidence. While these nontax costs can be large, noncorporate activity tends to be concentrated in industries where these costs are small, leading to little excess burden from the tax distortion to organizational form.

Date: 1992-12
Note: PE
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Citations: View citations in EconPapers (7)

Published as Journal of Public Economics, Vol. 55, no. 2, pp. 279-306, October 1994

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Related works:
Journal Article: Tax distortions to the choice of organizational form (1994)
Working Paper: Tax Distortions to the Choice of Organizational Form (1994)
Working Paper: Tax Distorsions to the Choice of Organizational Form (1993)
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