Open Access. Powered by Scholars. Published by Universities.®
Articles 1 - 2 of 2
Full-Text Articles in Law
A Tale Of Four Treatments: Preferential Taxation And Asset Valuation, Theodore S. Sims
A Tale Of Four Treatments: Preferential Taxation And Asset Valuation, Theodore S. Sims
Faculty Scholarship
Conventional wisdom is that preferential taxation of property income elevates asset values above their values in the absence of a tax, with those values strictly increasing in the marginal rate of the holder. I show that preferential tax rates (such as the rate on realized long-term capital gains) do indeed have that property. Preferential timing on the other hand -- pure "tax deferral" -- does not. The value of an asset subject to pure deferral does increase with the holder’s marginal rate, but only up to a point, at some marginal rate in excess of 50 percent. With increases in …
Economic Depreciation, Accrual Taxation, And The Samuelson Theorem: An Essay On The Structure Of Capital Income Taxation, Theodore S. Sims
Economic Depreciation, Accrual Taxation, And The Samuelson Theorem: An Essay On The Structure Of Capital Income Taxation, Theodore S. Sims
Faculty Scholarship
Samuelson (1964) showed that an income tax with an allowance for "economic" depreciation leads to asset valuations that are independent of their holders’ marginal rates of tax. The tax system is then "neutral," in the sense that assets have the same value to all, irrespective of whether or at what rate they are taxed. In this essay I illustrate and show formally that taxation of cash flow minus an allowance for economic depreciation leads to the taxation of value as it accrues. That is, economic depreciation and pure accrual taxation are exactly equivalent. I suggest also that the form of …