Risk Taking and Full Loss Offset Corporate Taxation with Interest Deductibility

Jack Mintz

Working Paper from Economics Department, Queen's University

Abstract: Corporate tax with interest deductibility may reduce risk taking because entrepreneurs might decrease the amount of investment in risky projects with higher corporate tax rates. Unlike Stiglitz' "Corporation Tax", we allow for decreasing returns to scale and equity financing of capital. We show that a corporate tax which falls on th real wealth of owners can, under certain exceptional conditions, reduce risk taking.

Pages: 16
Date: 1979
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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:356

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