scholarly journals An Empirical Analysis Of The Impact Of Tax Rates On Subchapter S Elections

2011 ◽  
Vol 11 (2) ◽  
pp. 84
Author(s):  
Linda Burilovich
Keyword(s):  
Small Businesses ◽  
Tax Rates ◽  
Corporate Tax ◽  
Double Taxation ◽  
Trade Off ◽  
Taxable Income ◽  
Corporate Form ◽  
Empirical Tests ◽  
The Impact ◽  
Loss Firms

Selecting the appropriate form of organization may be a difficult choice for a small business firm. The corporate form offers legal liability but imposes double taxation. The choice often becomes a trade-off between the nontax benefits of incorporating and the costs of double taxation. Certain small businesses qualify to make an election under Subchapter S of the tax code which allows them to operate as a corporation, but avoid the corporate tax by passing through taxable income or loss to shareholders. These firms are known as S corporations. This article examines the impact of personal and corporate tax rates on the propensity for small businesses to elect to operate as S corporations. The behavior of gain and loss firms is analyzed separately. Empirical tests suggest that tax rates do have a significant and sometimes surprising impact on this choice. These findings have significance for policymakers in attempting to reduce the costs of taxes to new firms which may be inhibited from entering the market due to the impact of double taxation.

scholarly journals A Critical Appraisal of Goods and Services Tax in India

2018 ◽  
Vol 5 (2) ◽  
Author(s):  
Rabinarayan Samantara
Keyword(s):  
Economic Growth ◽  
Small Businesses ◽  
Critical Appraisal ◽  
Tax Rates ◽  
Indian Market ◽  
Tax Base ◽  
Employment Opportunities ◽  
Mass Consumption ◽  
Goods And Services ◽  
The Impact

The present paper attempts to make a critical appraisal of Goods and Services Tax (GST), implemented in India from 1st July, 2017. In addition to explaining the structure of GST in India as well as the tax rates under it, the present paper attempts to analyse the impact of GST on certain major industries or sectors within the Indian economy. Although GST has certain obvious advantages including exemptions and low compliance burden for small businesses, lower tax rates for mass consumption goods, increase in tax base and tax collections, etc., it is noteworthy, however, that GST has certain limitations as well. In spite of this, it must be accepted that GST has helped in ensuring a common Indian market through the elimination of multiplicity of taxes as well as ‘ tax on tax ‘. It is expected to accelerate economic growth, help generate more of employment opportunities, and lead to increased tax base as well as increased revenue generation

Policy will not support US growth as much as expected

2017 ◽  
Keyword(s):  
Tax Reform ◽  
Tax Rates ◽  
International Financial Institutions ◽  
Corporate Tax ◽  
Donald Trump ◽  
Content Type ◽  
Corporate Tax Reform ◽  
Capital Spending ◽  
The Impact ◽  
Economic Outlook

Subject US economic outlook. Significance US equity markets have rallied and the dollar has strengthened against the euro since President Donald Trump was elected in November 2016 -- largely on expectations that stimulative policies will be introduced. One of Trump's campaign promises pledged to reform corporate taxes and lower tax rates, which would be expected to boost capital spending. He also pledged to raise infrastructure spending by 1 trillion dollars over ten years, as well as to reduce regulatory burdens to help jumpstart business investment. Impacts Trump could use executive powers in a more sweeping fashion if he cannot deliver changes via legislation. US opposition to reforms of international financial institutions could reduce the momentum behind global cooperation. If the proposal to finance the 1-trillion-dollar infrastructure plan by public-private partnerships is a success, 2018 GDP will benefit. If agreed by 2018 or 2019, corporate tax reform could boost GDP growth although the impact could be diluted if other countries follow suit.

The Impact of the Source of Changes in Marginal Tax Rates on Participation in Individual Retirement Accounts

2002 ◽  
Vol 24 (1) ◽  
pp. 46-59 ◽  
Author(s):  
David H. Eaton
Keyword(s):  
Fixed Effects ◽  
Tax Reform ◽  
Tax Rates ◽  
Tax Rate ◽  
Taxable Income ◽  
Individual Retirement Accounts ◽  
Retirement Accounts ◽  
Marginal Tax Rates ◽  
The Impact ◽  
Participation Decisions

This paper uses a series of two-year panels of tax return data to estimate the effects of two sources of tax rate changes on the participation in Individual Retirement Accounts (IRAs). This paper uses a panel logit approach to control for individual specific fixed effects, which may also influence IRA participation behavior. This paper examines participation during the years of open eligibility for IRAs, as well as examining the impact of the 1986 tax reform on participation. A key finding of this paper is that taxpayers' IRA participation decisions are more sensitive to changes in tax rates due to changes in taxable income than to direct changes in the tax tables.

scholarly journals Measuring the impact of marginal tax rate reform on the revenue base of South Africa using a microsimulation tax model

2015 ◽  
Vol 18 (3) ◽  
pp. 380-394 ◽  
Author(s):  
Yolande Jordaan ◽  
Nicholaas J Schoeman
Keyword(s):  
Economic Growth ◽  
Tax Reform ◽  
Fiscal Year ◽  
Optimum Level ◽  
Tax Rates ◽  
Strong Response ◽  
Taxable Income ◽  
Marginal Tax Rates ◽  
Tax Efficiency ◽  
The Impact

This paper is primarily concerned with the revenue and tax efficiency effects of adjustments to marginal tax rates on individual income as an instrument of possible tax reform. The hypothesis is that changes to marginal rates affect not only the revenue base, but also tax efficiency and the optimum level of taxes that supports economic growth. Using an optimal revenue-maximising rate (based on Laffer analysis), the elasticity of taxable income is derived with respect to marginal tax rates for each taxable-income category. These elasticities are then used to quantify the impact of changes in marginal rates on the revenue base and tax efficiency using a microsimulation (MS) tax model. In this first paper on the research results, much attention is paid to the structure of the model and the way in which the database has been compiled. The model allows for the dissemination of individual taxpayers by income groups, gender, educational level, age group, etc. Simulations include a scenario with higher marginal rates which is also more progressive (as in the 1998/1999 fiscal year), in which case tax revenue increases but the increase is overshadowed by a more than proportional decrease in tax efficiency as measured by its deadweight loss. On the other hand, a lowering of marginal rates (to bring South Africa’s marginal rates more in line with those of its peers) improves tax efficiency but also results in a substantial revenue loss. The estimated optimal individual tax to gross domestic product (GDP) ratio in order to maximise economic growth (6.7 per cent) shows a strong response to changes in marginal rates, and the results from this research indicate that a lowering of marginal rates would also move the actual ratio closer to its optimum level. Thus, the trade-off between revenue collected and tax efficiency should be carefully monitored when personal income tax reform is being considered.

scholarly journals The Incentive Effects of Marginal Tax Rates: Evidence from the Interwar Era

2014 ◽  
Vol 6 (3) ◽  
pp. 242-281 ◽  
Author(s):  
Christina D. Romer ◽  
David H. Romer
Keyword(s):  
Time Series ◽  
Income Tax ◽  
Positive Impact ◽  
Tax Rates ◽  
Marginal Rate ◽  
Taxable Income ◽  
Incentive Effects ◽  
Marginal Tax Rates ◽  
The Impact ◽  
Section Analysis

This paper uses the interwar United States as a laboratory for investigating the incentive effects of marginal income tax rates. We examine the impact of the large changes in rates in this period on taxable income using time-series/cross-section analysis of data by small slices of the income distribution. We find that the effect operated in the expected direction but was economically small, and that it is precisely estimated and highly robust. We also find suggestive time-series evidence of a positive impact of marginal rate cuts on business formation, but no evidence of an important effect on other indicators of investment. (JEL D31, H24, H31, M13, N42)

The impact of personal income tax rates on the employment decisions of small businesses

2018 ◽  
Vol 7 (1) ◽  
pp. 74-104
Author(s):  
Kathleen Grace
Keyword(s):  
Small Business ◽  
Small Businesses ◽  
Income Tax ◽  
Personal Income ◽  
Tax Rates ◽  
Personal Income Tax ◽  
Employment Decisions ◽  
Wage Bill ◽  
Content Type ◽  
The Impact

Purpose Small businesses file taxes in accordance with the personal income tax code because they are considered flow-through entities. Thus, personal income tax reforms directly affect the incentives small business owners face regarding employment and operations. The paper aims to discuss these issues. Design/methodology/approach The authors use the changes in personal income tax rates during the 1993 and 2001-2003 reforms and micro-level data to estimate the effect of statutory tax rate changes on small business employment decisions. Findings The authors add two contributions to the current literature: first, the author allow for intertemporal tax planning and second, the author allow the firm’s decision to employ labor to be correlated with the firm’s wage bill decision. Estimation of a Heckman selection model for wage bills shows that the probability that a business will employ labor is 1.18 percent higher when current tax rates increase by one percentage point and 0.70 percent lower when future rates are expected to increase by one percentage point. Among firms that already employ labor, the median wage bill elasticity with respect to current tax rates is −0.64. These estimates are larger than those reported in previous research because my model includes future taxes and allows for correlation between the firm’s employment and wage bill decisions. Omitting the intertemporal tax responses biases the estimates of previous researchers upwards, whereas assuming the two firm decisions are independent biases estimates towards zero. Originality/value This paper has been cited in publications published in Journal of Entrepreneurship and Public Policy.

scholarly journals The Non-Linear Effect of Corporate Taxes on Economic Growth

2015 ◽  
Vol 8 (s1) ◽  
pp. 14-31 ◽  
Author(s):  
Ján Huňady ◽  
Marta Orviská
Keyword(s):  
Economic Growth ◽  
Linear Relationship ◽  
Fixed Effects ◽  
Negative Impact ◽  
Strong Support ◽  
Tax Rates ◽  
Corporate Tax ◽  
Non Linear ◽  
Corporate Tax Rates ◽  
The Impact

Abstract The paper deals with the problem of taxation and its potential impact on economic growth and presents some new empirical insights into this topic. The main aim of the paper is to verify an assumed nonlinear impact of corporate tax rates on economic growth. Based on the theory of public finance and taxation, we hypothesize that at relatively low tax rates it is possible that the impact of taxation on economic growth become slightly positive. On the other hand when the tax rates are higher a negative impact of taxation on economic growth could be expected. Despite the fact that the most of the existing studies find a negative linear relationship between these variables, we can also find strong support for a non-linear relationship from several theoretical models as well as some empirical studies. Based on panel data fixed-effects econometric models, we, as well, find empirical evidence for a non-linear relationship between nominal and effective corporate tax rates and economic growth. Our data consists of annual observations for the period 1999 to 2011 for EU Member States. Based on the results, we also estimated the optimal level of the corporate tax rate in terms of maximizing economic growth in the average of the EU countries.

The Elasticity of Corporate Taxable Income: New Evidence from UK Tax Records

2014 ◽  
Vol 6 (2) ◽  
pp. 19-53 ◽  
Author(s):  
Michael P. Devereux ◽  
Li Liu ◽  
Simon Loretz
Keyword(s):  
Tax Revenue ◽  
Tax Rates ◽  
Corporate Tax ◽  
Marginal Rate ◽  
Tax Rate ◽  
Taxable Income ◽  
Corporation Tax ◽  
Tax Returns ◽  
The Difference ◽  
New Evidence

We estimate the elasticity of corporate taxable income with respect to the statutory corporation tax rate using the population of UK corporation tax returns. We analyze bunching in the distribution of taxable income at kinks in the marginal rate schedule. We decompose this elasticity into an elasticity of total income with respect to the corporation tax rate, and an elasticity of the share of income taken as profit with respect to the difference between the personal and corporate tax rates. This implies a marginal deadweight cost at the £10,000 kink of around 29 percent of tax revenue. (JEL G32, H24, H25, L25)

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