This paper uses recent developments in the theory of optimal capital structure to demonstrate how the federal corporate income tax with an interest deduction, but without a corresponding dividend deduction, misallocates capital within the corporate sector by encouraging investment in low-risk, low-growth projects employing tangible assets over high-risk, high-growth projects employing intangible assets.
Business Entities, Corporations, Economics, Income Taxation, Taxation-Federal Income
Knoll, Michael S., "Taxing Prometheus: How the Corporate Interest Deduction Discourages Innovation and Risk-Taking" (1993). Faculty Scholarship at Penn Law. 1150.
Business Administration, Management, and Operations Commons, Business Organizations Law Commons, Corporate Finance Commons, Economic Policy Commons, Economics Commons, Law and Economics Commons, Taxation-Federal Commons, Tax Law Commons