Journal of Political Economy Vol. 92 No. 1 1984
The Taxation of Risky Assets
Abstract
This paper reconsiders the effects of taxation on risky assets, recognizing the importance of variations in asset prices. We show that earlier analyses that assumed that depreciation rates are constant and that the future price of capital goods is known with certainty are very misleading as guides to the effects of corporate taxes. We then examine the concept of economic depreciation in a risky environment and show that depreciation allowances, if set ex ante, should be adjusted to take account of future asset price risk. Some empirical calculations suggest that these adjustments are large and have important implications for the burdens of, and nonneutralities in, the corporation income tax.
- Volume
- 92
- Issue
- 1
- Pages
- 20-39
- Sources
- bibtex:phds-export.bib