Why is the corporate tax rate lower than the personal tax rate? The role of new firms

• 成果类型: Article; Proceedings Paper
• 署名作者: Fuest, C; Huber, B; Nielsen, SB
• 署名单位: University of Cologne; Copenhagen Business School
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/S0047-2727(01)00166-9
• 发表日期: 2003
• 页码: 157-174
• 关键词: capital structure; start-up firms; Tax policy

摘要

In many OECD countries, statutory corporate tax rates are lower than personal income tax rates. This tax rate difference is often particularly large for small firms. The present paper argues that a reduction of the corporate tax rate below the personal tax rate is an optimal tax policy if there are problems of asymmetric information between investors and firms in the capital market. The reduction of the corporate tax rate below the personal tax rate encourages equity financing and thus mitigates the excessive use of debt financing induced by asymmetric information. Our main theoretical result stands in marked contrast to the traditional view of corporate taxation and corporate finance theory, according to which there is a tax disadvantage to equity financing. More recent empirical evidence on this issue, however, is in line with our result. (C) 2003 Published by Elsevier Science B.V.