TY - JOUR
T1 - A cost of tax planning
AU - Margalioth, Yoram
AU - Sulganik, Eyal
AU - Eldor, Rafael
AU - Edrey, Yoseph
N1 - Funding Information:
* The authors would like to thank Michael Rabin for his invaluable help with the proof; David Weisbach for his excellent comments on an earlier version presented at a conference at the University of Michigan, and an anonymous referee for very helpful comments and suggestions that significantly improved the paper. Yoram Margalioth would also like to thank the Cegla Center for Interdisciplinary Research of Law for financial support.
PY - 2009
Y1 - 2009
N2 - Tax planning is an area of growing interest and this paper is an attempt to contribute to the small formal literature on this topic. The paper analyzes the case of tax planning that manipulates the tax system to impose lower effective tax rates on gains than on losses, and proves that such tax planning may provide firms with an incentive to produce more than the social optimum. This inefficiency is different from the general inefficiency entailed by income taxation, captured by the conventional notion of excess burden. A low asymmetric tax may be more distortive than a high symmetric tax rate.
AB - Tax planning is an area of growing interest and this paper is an attempt to contribute to the small formal literature on this topic. The paper analyzes the case of tax planning that manipulates the tax system to impose lower effective tax rates on gains than on losses, and proves that such tax planning may provide firms with an incentive to produce more than the social optimum. This inefficiency is different from the general inefficiency entailed by income taxation, captured by the conventional notion of excess burden. A low asymmetric tax may be more distortive than a high symmetric tax rate.
UR - http://www.scopus.com/inward/record.url?scp=67549119382&partnerID=8YFLogxK
U2 - 10.2202/1555-5879.1298
DO - 10.2202/1555-5879.1298
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AN - SCOPUS:67549119382
SN - 1555-5879
VL - 5
JO - Review of Law and Economics
JF - Review of Law and Economics
IS - 1
M1 - 7
ER -
