Suchergebnisse

By borrowing money and purchasing preferred stocks with an average yield greater than 58% of the interest rate on the debt, a corporation at the maximum marginal tax rate can reduce its federal income tax liability. In evaluating the potential benefit of this practice, the corporation must consider transactions costs and its ability either to tie the debt to the equities or to have a sufficiently distant maturity on the debt to weather interest rate cycles that depress preferred stock prices. A small to medium-sized corporation probably is in a better position to obtain appropriate debt and to purchase enough equities, without depressing yields, to make the use of fully leveraged equity investments have a significant impact on its tax liability. A corporation would also have to assess the chances that the dividends would cause personal holding company tax liability in periods of low operating earnings. In securing the loans, the corporation would have to avert the danger that interest deductions might be disallowed under tax rules pertaining to related parties, capital structure, and debt-financed corporate acquisitions. An analysis of the past application of the interest deduction disallowance provision relating to the holding of tax-exempt securities indicates that the government would have difficulty in creating and applying to corporations an interest disallowance provision when high-yield equities, rather than tax-exempts, are related to the d

THE TRADITIONAL APPROACH TO THE ANALYSIS OF TAX DEDUCTIONS, CREDITS, AND DIRECT SUBSIDIES RESTS ON CERTAIN IMPLICIT ASSUMPTIONS. IN THIS PAPER THE AUTHOR TAKES A DIFFERENT APPROACH TO THE ANALYSIS OF DEDUCTIONS, CREDITS, AND DIRECT SUBSIDIES, A PUBLIC CHOICE APPROACH WHEREIN ITS ASSUMED THAT THE LEVEL OF PUBLIC EXPENDITURE IS DETERMINED BY INDIVIDUAL PREFERENCES FOR PUBLIC VERSUS PRIVATE GOODS THROUGH VOTING. THESE INDIVIDUAL PREFERENCES IN TURN DEPEND ON INCOME, ON OTHER VARIABLES PERHAPS, AND ON THE RELATIVE PRICE OF PUBLIC GOODS. THUS, THE STRUCTURE OF THE TAX SYSTEM HAS IMPORTANT IMPLICATIONS FOR EFFICIENCY IN PUBLIC EXPENDITURE BECAUSE IT DETERMINES THE TAX-PRICES WHICH DIFFERENT INDIVIDUALS PAY. DIFFERENT TAX STRUCTURES IMPLY DIFFERENT DISTRIBUTIONS OF THE TAX BURDEN AMONG THE INDIVIDUAL TAXPAYERS AND DIFFERENT TAX-PRICES FOR EACH INDIVIDUAL. DIFFERENT SETS OF TAX-PRICES GENERATE DIFFERENT SETS OF INDIVIDUALLY PREFERRED PUBLIC EXPENDITURE LEVELS AND HENCE DIFFERENT VOTING OUTCOMES.

Abstract"One man's views" of a high‐quality state‐local revenue system, spelling out in some detail the proper mix of components that should go into an "ideal" system.