TY  - JOUR
AU  - Edgerton, Jesse
TI  - Investment, Accounting, and the Salience of the Corporate Income Tax
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 18472
PY  - 2012
Y2  - October 2012
DO  - 10.3386/w18472
UR  - http://www.nber.org/papers/w18472
L1  - http://www.nber.org/papers/w18472.pdf
N1  - Author contact info:
Jesse Edgerton
116 John St. Apt. 2901
New York, NY 10038
Tel: 347-512-7378
E-Mail: jesse.edgerton@gmail.com
M1  - published as Jesse Edgerton. "Investment, Accounting, and the Salience of the Corporate Income Tax," in Michael Devereux and Roger Gordon, organizers, "Business Taxation (Trans-Atlantic Public Economics Seminar)" American Economic Journal: Economic Policy, Volume 6, no. 2 (2014)

M3  - presented at "Trans-Atlantic Public Economics Seminar", June 20-22, 2012
AB  - This paper develops and tests the hypothesis that accounting rules mitigate the effect of tax policy on firm investment decisions by obscuring the timing of tax payments. I model a firm that maximizes a discounted weighted average of after-tax cash flows and accounting profits. I estimate the weight placed on accounting profits by comparing the effectiveness of tax incentives that do and do not affect them. Investment tax credits, which do affect accounting profits, have larger effects on investment than accelerated depreciation, which does not. This difference in estimated effects is not obviously driven by discounting, cash flow effects, or measurement error. Results thus suggest that accelerated depreciation provisions are less effective than they otherwise would be and that the corporate income tax could create smaller distortions to investment decisions than we would otherwise estimate.
ER  -